Partially Regulated
State Governments are empowered to legislate on betting and gambling, as well as games of skill (betting and gambling are state subjects under the Constitution of India. Certain High Courts have also recognised that States may regulate games of skill), with each State having its own law (“Gaming Enactments”). Most Gaming Enactments prohibit gambling, i.e., “the act of wagering or betting” for money or money’s worth on games of chance, however, exclude games of skill from their prohibitions. There is no regulation through a licensing regime to offer games of skill in most Indian States (apart from Nagaland, and soon, Tamil Nadu). The States of Goa and Sikkim have enacted laws to regulate brick and mortar casinos in five-star hotels and onboard ships.

At the central level, the Ministry of Electronics and Information Technology (“MeitY“) and the Ministry of Youth Affairs and Sports have been appointed as the nodal ministries for online gaming and e-sports respectively. Furthermore, the Ministry of Information and Broadcasting (“MIB“) has been given authority over internet ads, and such authority may extend to gaming advertisements. Previously, there was no Central Ministry designated for these areas.

Subsequent to the foregoing, the MeitY had enacted central regulations, especially for real money gaming, via amendments (“2023 Amendments“) to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Rules“) on April 6, 2023. The 2023 Amendments sought to establish a light-touch, co-regulatory framework between MeitY and designated self-regulatory industry bodies (“SRB“), consistent with the government’s general goal of eliminating prescriptive regulations and improving the ease of doing business in India. The 2023 Amendments introduced regulations for  permissible online real money games (“PORMG”), other online games, and online gaming intermediaries (“OGI”) seeking to offer PORMG. The 2023 Amendments were not envisioned to replace the State-wise Gaming Enactments, and were meant to co-exist with them.

The 2023 Amendments were to be operationalised through the designation of at least 3 self-regulatory gaming bodies. Accordingly, subsequent to their introduction, the All India Gaming Federation, the Esports Player Welfare Association, and the E-Gaming Federation (“EGF”) and the Federation of Indian Fantasy Sports had each submitted three applications to be designated as an SRB. However, as per news reports, MeitY has abandoned the plan to develop SRBs for game certification, due to concerns over the heavy domination of gaming companies on such SRBs which would lead to a lack of independent decision-making. MeitY will now directly regulate the online gaming sector. Accordingly, the 2023 Amendments have not been operationalised and will likely not be operationalised. We have therefore not covered them in detail in this outline.

As per the latest news reports, an Indian university, the National Law University, Delhi, and the EGF have been consulting industry stakeholders on the regulation of online gaming in India.

Apart from the gaming enactments, Certain products are regulated under special laws, such as the Lotteries (Regulation) Act, 1998 and the Lotteries (Regulation) Rules, 2010, (“Lottery Laws”) which regulate State Lotteries. Additionally, the Prize Competitions Act, 1955 (“PCA”) regulates certain types of competitions. Section 2(d), PCA: Prize competition means “any competition (whether called a crossword prize competition, a missing-word prize competition, a picture prize competition or by any other name) in which prizes are offered for the solution of any puzzle based upon the building up, arrangement, combination or permutation, of letters, words, or figures.”

For offshore operators, certain other laws apply to offering online games in India. For instance, the Foreign Exchange Management Act (“FEMA”) read with the Foreign Exchange Management (Current Account Transaction) Rules, 2000 (“Current Account Rules”) prohibit remittances by Indian users for certain gaming activities.

Market size
As per reports, India’s gaming market size is estimated to be around USD 3.1 billion in FY 23, with the market size of online games being USD 1.9 billion, and the total gaming market size is predicted to reach USD 7.5 billion by FY 28. These reports state that this is the ‘golden age’ of gaming in India.

Revenue in FY 2023, by types of games:

Total: INR 164 billion

• Real Money Games (“RMG”): INR 135 billion
• Online Fantasy Sports: INR 28 billion
• Non RMG and Esports: INR 28.3 billion

Total number of users in FY 2023: Around 568 Million 

Competitive landscape
India does not have a public registry of gaming operators, hence there are no clear market figures in terms of the number of operators. However, as per some reports, India has over 450 million online gamers and over 90 million of such gamers play real money games.

Localisation
Payment methods accepted on gaming platforms in India include methods such as debit/credit cards and United Payments Interface (UPI), which is a popular real-time mobile payment method that allows users to transfer funds between bank accounts, net banking and prepaid payment instruments such as wallets. Certain gaming operators accept payment in cryptocurrency.

The most popular and prominent marketing/advertising channels in India are online/digital (through social media), print advertisement, electronic media and cable television, telecommunication services (such as SMS), and physical advertisements such as billboards/hoardings.

Top Key Attractions and Challenges
Attractions

• Games of skill are permitted to be offered for money in most states in India, and several game formats such as fantasy sports and real-world games such as chess, Ludo, and Rummy have a large number of players in India. As detailed in ‘Market size’ above , the number of users and the revenue from gaming has been promising and continues to grow at an unprecedented rate. Since 2021, India has seen 3 gaming unicorns (Dream Sports, Games 24×7, and MPL) and 1 successful IPO (Nazara Technologies). Hence, investments and joint ventures with Indian skill gaming companies may present a lucrative opportunity.
• Casual Games: Casual players make up over 90% of the players in India, at around 442 million in 2023. At present, there are very limited regulations for casual games in India, i.e., free-to-play games without any deposit nor any real money winnings. These games do not attract the definition of ‘gaming’ under most Gaming Enactments and hence do not attract the applicability of these laws in most Indian States.
• India’s large, youth population: India’s population as of 2021 stands at 1.38B. At 15B installs of gaming apps, India had the highest share of game downloads at 17% globally in FY 22. The number of gamers in India stood at 507M in FY 22, growing at a CAGR of 12% from 450M in FY21. Out of the 507M, the amount of paying gamers stands at 120M, growing at a CAGR of 25%. In addition to being the second most populous country, India has one of the largest youth populations in the world. This could lead to an increase in number of players in India, including those that may consider gaming and e-sports as a career option.
• Ease of access to smartphones and the internet: India has the highest consumption of mobile data per smartphone user on a global level. This makes India a large market of people with easy smartphone and internet access to access online games.
• Regulatory certainty on the horizon: The 2023 Amendments propose a light-touch regulatory framework in line with the government’s overall objective of reducing prescriptive laws. The government seeks to regulate the industry directly, regarding which there also have been consultations with industry stakeholders.

Challenges

• State specific nature of laws: Each state in India has its own Gaming Enactment. While most states exclude games of skill from the prohibitions under their Gaming Enactments, some States have sought to ban skill games.
• Further, only a few State laws identify which games are games of skill (e.g., West Bengal, Kerala, and Nagaland). Judicial precedents have only recognised certain games as games of skill. There is no single machinery currently to test whether a particular game is a game of skill throughout India. These factors have resulted in State-wise uncertainty for operators. Regulation of the online gaming industry by the central Government.
• Gambling/games of chance prohibited: In India, most Gaming Enactments prohibit games of chance or gambling for money. Games such as sports betting and most casino games are regarded as games of chance/gambling activities, and hence prohibited in most Indian States. There has been increased regulatory scrutiny of offshore sports betting and casino operators offering their products remotely in India, as discussed in the Enforcement section below.
• High income tax rates: Tax on winnings from online games are calculated at the rate of 30% on the amount of net winnings from the online games.
• Uncertainty with respect to GST: There has been confusion on whether GST should be charged at the rate of 28% or 18% on skill gaming, and whether the GST should be charged on the entire amount which a player deposits for a game, or on the platform fee only. The GST regime has been amended to levy GST at 28% on the full face value of bets deposited with online gaming operators with effect from 01.10.2023. Please see the Taxes section below for a detailed explanation of the amendments.

Products
As stated above, most Gaming Enactments do not regulate specific products/games, but (1) prohibit gaming/gambling, i.e., games of chance, and (2) exclude games of skill from their purview. Only certain games have been identified as games of skill under the Gaming Enactments or through court jurisprudence. We have discussed this in the product sections below.

“Gambling” or “Gaming” as per most Gaming Enactments is understood to mean “the act of wagering or betting” for money or money’s worth on games of chance, and winning prizes in terms of money or money’s worth. Hence, free-to-play / casual games do not amount to ‘gaming’ under most Gaming Enactments. Further, typically, under most Gaming Enactments “gambling” or “gaming” does not include (i) wagering or betting upon a horse-race/dog-race, when such wagering or betting takes place in certain circumstances; and (ii) lotteries. Most Gaming Enactments also exclude games of skill from their purview.

In addition, the Prize Competitions Act, 1955 (“PCA”) regulates certain types of competitions involving the building up, arrangement, combination or permutation of letters, words, or figures. In the case of R.M.D. Chamarbaugwala & Anr. vs. Union of India & Anr., the Supreme Court held that the PCA would only apply to prize competitions that were of a gambling nature. However, due to the types of games covered under the PCA (i.e., crossword prize competitions, etc., which appear to be games of skill), there is an anomaly in the scope of the PCA. The PCA regulates prize competitions in which (a) the total value of prizes offered (whether in cash or otherwise) exceeds INR 1,000 (approx. USD 12) and (b) the value of entries exceeds INR 2,000 (approx. USD 24). Any person intending to conduct such prize competitions has to obtain a licence to engage in such activities, and the details for obtaining such licences are provided in the rules framed thereunder.

Other than this, various aspects affecting the gaming industry from investments to advertisements are regulated under separate bodies of law, which we have elaborated upon under the product-specific sections.