| UPSC Relevance: GS-II (Polity): Federalism, Right to Trade (Article 19). |
Why in News?
On August 20–21, 2025, Parliament passed the Promotion and Regulation of Online Gaming Bill, 2025, which received Presidential assent on August 22. The law bans Real Money Games (RMGs) in all forms, criminalises their advertisement, and empowers the Centre to block such platforms. This has triggered intense debate on public health, economy, federalism, and digital innovation.
Background
- India’s online gaming market has grown rapidly, supported by celebrities and foreign investments.
- Government estimates show Indians lose around ₹15,000–20,000 crore annually on RMGs.
- The World Health Organization (2019) classified “gaming disorder” as a mental health condition, warning of compulsive behaviour and family disruption.
- Karnataka alone reported 32 suicides in 31 months linked to online gaming addiction
What are the Three Segments of Online Games?
Online Money Games (RMGs)
- Definition: “Any online game, whether based on skill, chance, or both, played after fee-payment or with the expectation of winning money or other stakes (credits, coins, tokens, or virtual money convertible into cash)”
- Examples: Rummy, Poker, Fantasy Cricket, Ludo (with stakes)
- Celebrity Endorsements:
- Ranbir Kapoor & Aamir Khan → Dream11
- M.S. Dhoni → WinZo
- Hrithik Roshan → RummyCircle
- Sourav Ganguly → My11Circle
- Status under Act: Completely banned, along with all advertisements
E-Sports
- Definition: “Games recognised under the National Sports Governance Act, 2025 and registered with a regulatory authority, with performance-based prizes”
- Entry/Registration Fees: Allowed
- Examples: Competitive play in Call of Duty, GTA tournaments
- Status under Act: Promoted as a legitimate sporting activity
Social Gaming
- Definition: Not legally defined, but covered as “games played on digital/electronic devices through the Internet without money stakes”
- Examples: Candy Crush, Chess apps, Educational simulation games
- Status under Act: Encouraged for recreation & education — Government may even fund development of such games
What does the Act Outline on Regulation?
Ban on RMGs
- Platforms offering Real Money Games (RMGs) will face strict penalties
Penalties
- Offering RMGs / handling transactions → Up to 3 years imprisonment + ₹1 crore fine
- Unlawful advertisements → Up to 2 years imprisonment + ₹50 lakh fine
- BNSS, 2023 classification → All offences are cognisable & non-bailable
Enforcement Mechanisms
- CERT-IN (India’s Cyber Security Agency) empowered to block apps/websites
- Interpol may be engaged to act against offshore operators
Important Clarification
- Players/Users will NOT be punished
- Penalties apply only to operators, advertisers, and intermediaries
Regulatory Authority
The Central Government may establish a new authority to:
- Categorise online games
- Recognise legitimate platforms
- Register operators under clear rules
Why has the Government Brought the Act?
1️⃣ Public Safety & Health
- Rising cases of addiction-related suicides and family disruption.
- Addiction impact: Linked to anxiety, depression, and social withdrawal (Indian Journal of Psychiatry, 2023).
2️⃣ Financial Security
Tax evasion:
- ₹2,000 crore by gaming portals (2022).
- ₹30,000 crore GST evasion flagged.
Frauds & scams:
- Chinese app FIEWIN defrauded Indians of ₹400 crore (ED investigation).
- Many users, especially youth & low-income families, trapped in debt cycles due to micro-transactions.
3️⃣ National Security Concerns
Parliamentary Report (2023) flagged use of portals for:
- Terror funding
- Money laundering via mule accounts & crypto wallets
Enforcement Directorate uncovered hawala & crypto laundering through online gaming apps.
4️⃣ Opaque Algorithms
- Government argues that platforms are rigged:
“No user can be a net winner in the long run.”
- Creates a systematic financial loss trap for players.
Concerns with the Act
1. No Distinction between Skill & Chance
- Supreme Court rulings (e.g., on Rummy and Fantasy Sports) recognised these as games of skill.
- The Act, however, treats all money games as gambling, ignoring judicial precedent.
2. Federalism Issue
- Constitutional Entry: Betting & gambling fall under the State List (Entries 34 & 62).
- State Examples:Telangana (2017), Andhra Pradesh (2020), and Tamil Nadu (2022) have already legislated on online money games.
- A blanket Central law risks Centre–State friction and may face judicial challenge.
3. Economic Impact
Revenue & Growth Loss:
- PwC Report (2023) → RMG industry earned ₹16,500 crore, projected ₹26,500 crore by 2028.
- Ban halts this growth trajectory.
Investment Risks:
EY Data: ~₹22,931 crore (2019–23) in FDI & domestic inflows now threatened.
- Jobs: Over 2 lakh jobs in 400+ gaming companies at risk.
- User Migration: Ban may push users towards illegal offshore apps via VPNs, beyond regulatory reach.
4. Taxation Losses
- After 28% GST (2023), government revenues jumped 412% in 6 months (₹6,909 crore).
- With a ban, this emerging tax stream collapses, hurting fiscal gains.
5. Ineffectiveness of Blanket Prohibitions
- Past bans on liquor, cryptocurrency, and price controls often ended up fueling black markets instead of eliminating them.
- The gaming ban risks similar unintended consequences.
6. Policy Instability
- Frequent regulatory shifts — first 28% GST, now a complete prohibition — create uncertainty for long-term investors.
- Could damage India’s credibility as a stable digital economy hub.
Constitutional & Legal Dimensions
Federal Jurisdiction
- Entry 34, State List places gambling and betting under State control.
- The Centre’s move for a nationwide ban could therefore be challenged as an infringement on federal powers.
Fundamental Rights Concern
- Article 19(1)(g) guarantees the freedom to practise any trade, profession, or occupation.
- A blanket prohibition on money games may be argued as disproportionate and unconstitutional, especially if skill-based activities are equated with gambling.
Judicial Precedents
- K.R. Lakshmanan v. State of Tamil Nadu (1996): Supreme Court clearly distinguished games of skill from games of chance, holding the former outside the ambit of gambling laws.
- High Courts (Delhi, Rajasthan, Punjab & Haryana) have upheld fantasy sports as predominantly skill-oriented.
Ongoing Supreme Court Scrutiny
The apex court is currently examining:
- The issue of retrospective GST demands on RMGs.
- Whether fantasy sports, poker, and rummy should legally be treated as gambling.
Several interim stay orders have already been granted, highlighting judicial unease with sweeping taxation and prohibition.
Way Forward
1. Recognise Skill vs. Chance
- Establish a clear legal and regulatory distinction between games of skill (e.g., rummy, fantasy sports) and games of chance (pure gambling).
- Align with judicial precedents and international practices.
2. Targeted Regulation, Not Blanket Bans
- Instead of an absolute prohibition, adopt a regulated framework with strict licensing.
- Encourage self-regulation codes, monitored by a government-backed authority.
3. Stronger Safeguards for Users
- Mandatory age-verification & KYC norms to prevent underage access.
- Parental control tools and spending limits to reduce risks of addiction.
4. Transparency & Accountability
- Impose algorithm audits to ensure fairness.
- Require platforms to disclose winning probabilities and game design structures.
5. International & Cross-Border Cooperation
- Strengthen collaboration with agencies like Interpol to tackle illegal offshore operators.
- Block unregistered apps while ensuring a legitimate domestic industry thrives.
6. Public Health Measures
- Launch awareness campaigns highlighting risks of gaming addiction.
- Establish helplines, counselling centres, and digital detox programmes for affected individuals.
Conclusion
The Online Gaming Act, 2025 marks India’s first comprehensive effort to create a uniform regulatory framework for the fast-growing online gaming sector. While it correctly addresses concerns of addiction, financial distress, and fraud, the decision to impose a blanket ban on Real Money Games (RMGs)—without differentiating between skill and chance—raises serious concerns of legal validity, economic fallout, and user migration to unregulated grey markets.
For India, the real test lies in striking a balance between public health protection and digital economy growth, while also respecting the federal division of powers under the Constitution. Ultimately, the Supreme Court’s final ruling will play a decisive role in shaping how the country navigates the fine line between recreation and risk in the digital playground.
UPSC MAINS PRACTICE QUESTION-
“Despite progressive legal recognition, transgender persons in India continue to face bureaucratic and social hurdles in securing their identity rights.” Critically examine this statement in the light of recent judicial interventions and suggest measures to ensure dignity and equality for transgender persons. (15 marks, 250 words)
SOURCE- THE HINDU
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