Explainer: Online real money games and why govt is seeking to ban them

If passed, the online gaming bill could shut down the RMG industry, which employs 200,000 people and contributes ₹20,000 crore in GST annually

The central government has finalised a draft law that seeks to ban all forms of online real-money games, which was tabled in Parliament on Wednesday. If passed, the legislation could effectively shut down the real-money gaming (RMG) industry that has drawn significant investment, created thousands of jobs, and attracted nearly 500 million players across the country.

 

What are online real-money games (RMG)?

In simple terms, online real-money gaming (RMG) refers to digital platforms where players pay to participate in games and can win cash rewards. These include any online games involving cash stakes and monetary winnings. Banks and payment providers will also be prohibited from processing RMG transactions.

   

Under the draft Bill, all online real-money gaming services are covered.

 

This means any game where users stake or win money would be banned, as the Bill makes it an offence to “offer, aid, abet, induce, or otherwise promote” such games.

 

Are e-sports included in the Bill?

No. In fact, e-sports are encouraged. E-sports (short for electronic sports) are organised, competitive video gaming where players or teams compete against each other. BGMI (Battlegrounds Mobile India), League of Legends, Call of Duty, and PUBG are some examples of popular esports. 

 

The Bill specifically distinguishes e-sports and online social games (where players spend on in-app purchases or ads but do not win cash rewards).

 

A new authority (or an existing one) will be tasked with promoting and regulating e-sports, while banning RMG.

 

What does the draft Bill propose?

The Promotion and Regulation of Online Gaming Bill, 2025, cleared by the Union Cabinet, seeks to:

• Ban any person or company from offering, aiding, or promoting online money games.
• Classify any game involving an entry fee or monetary deposit as an “online money game,” regardless of whether it is skill- or chance-based.
• Prohibit advertisements for such games.
• Bar banks and financial institutions from processing payments linked to these platforms.

 

Penalties and non-compliance under new online gaming bill

The Bill also seeks to impose heavy penalties for those caught breaking the rule. These penalties include:

• Up to three years’ imprisonment and fines of ₹1 crore for hosting such games.
• Up to two years’ imprisonment and fines of ₹50 lakh for promoting them.

Other legal provisions in the bill include:

• Repeat offences: Hosting or facilitating RMG a second time can draw a mandatory minimum of three years’ imprisonment (up to five years) and fines between ₹1 crore and ₹2 crore. Repeat advertising violations carry 2-3 years’ jail and fines between ₹50 lakh and ₹1 crore.
• Corporate liability: If a company is involved, directors and managers can be prosecuted unless they prove the offence happened without their knowledge or despite due diligence. Independent/non-executive directors are exempt.
• Banks, payment providers, or intermediaries who process RMG payments face up to 3 years in prison and a ₹1 crore fine.

 

Failure to follow directions from the central government or the new authority may lead to ₹10 lakh fine, suspension or cancellation of registration, and prohibition from operating. Offences related to hosting and financial facilitation are explicitly declared cognisable and non-bailable under the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023.

 

Who will oversee the enforcement of RMG ban?

A new authority will be set up to oversee the enforcement of the Bill. It is expected to cost about ₹50 crore initially and ₹20 crore annually, funded from the Consolidated Fund of India.

 

Why is the government pushing this?

As earlier reported by Business Standard, officials have cited a sharp rise in gaming addiction among children and youth, leading to financial losses and mental health issues. Several states, including Tamil Nadu, have already imposed restrictions on money-based games in recent years, setting the stage for a national law.

 

Industry pushback: RMG contribute ₹20,000 crore in GST

Industry bodies, including the All India Gaming Federation (AIGF), the Federation of Indian Fantasy Sports (FIFS), and the E-Gaming Federation (EGF), have opposed the ban, warning it could shut more than 400 firms, cut 200,000 jobs, and drive players to unsafe offshore sites that pay no taxes.

 

The sector already contributes ₹20,000 crore in GST annually and could support India’s $1-trillion digital economy goal—if guided by stronger regulation instead of a blanket ban.

 

The tax question: GST pressures mount

The draft ban comes as RMG firms are already reeling under a 28 per cent GST imposed in October 2023. The government is now considering hiking the levy further to 40 per cent, placing these games in the same “sin goods” category as tobacco and alcohol.

 

In the GST framework, the government does not distinguish between games of chance and games of skill for tax purposes—both were brought under the same regime with a uniform 28 per cent GST on the full face value of deposits, alongside a 30 per cent flat tax on winnings under Section 115BBJ. This effectively treated e-sports, fantasy sports, rummy, and even casino-style betting as one category.

 

However, the draft Promotion and Regulation of Online Gaming Bill, 2025, introduces a clear distinction between the two. It remains unclear whether GST norms will be revised to reflect these distinctions—something e-sports firms have been advocating since the tax regime was first imposed.

 

What's next?

The Bill was introduced in Parliament today and will be debated before being put to a vote. In the meantime, industry leaders are lobbying for a meeting with the Home Minister and urging the adoption of a more balanced regulatory framework instead of an outright ban.