Sep 14, 2026 | 6:31 am
India’s online gaming sector entered a new regulatory phase on 1 May, when the Promotion and Regulation of Online Gaming (PROG) Act and the Online Gaming Rules 2026 took effect. The framework prohibits online money games regardless of whether they rely on skill or chance, while creating separate categories for esports and social games.
However, questions about classification, payments and registration remain unresolved, leaving operators to assess how the rules apply to their services.
Real-Money Operators Face A Changed Legal Landscape
The Act prohibits offering online money games, advertising them and facilitating payments connected to them. Violations can carry imprisonment of up to three years, fines of up to INR 1 crore, or both. Repeat offences face higher penalties, while offshore operators are also within the framework’s reach.
The definition of an online money game remains broad. It covers games where users pay fees, deposit money or provide other stakes in expectation of monetary or equivalent returns, regardless of whether skill or chance determines the outcome.
The Supreme Court’s 27 May ruling upholding the 28% goods and services tax on the full value of deposits, including past periods, adds another financial consideration for the industry.
Several major companies had already suspended cash-based offerings after the Act passed in August 2025. Dream11, MPL, Zupee and PokerBaazi moved away from real-money formats, with some operators exploring free-to-play products supported by advertising and sponsorships.
Social Games Offer Alternative Revenue Models
The rules allow social games to generate revenue through subscriptions, access fees, advertising and in-game purchases, provided these arrangements do not turn the product into a prohibited money game.
The distinction can be difficult to establish. Tokens may qualify as stakes when they create a route to monetary returns, while cosmetic purchases may be permitted when they have no connection to winning.
The framework also leaves questions about what qualifies as a game or gameplay. App stores, aggregators and other intermediaries may need to assess whether their activities bring them within the rules.
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Registration And Compliance Need Further Clarification
Esports has a separate route under the framework, including registration and the possibility of performance-based prize money. However, the detailed recognition process and eligibility criteria had not been prescribed when the rules took effect.
Payment-related requirements also raise questions. The obligation to notify authorities of changes may create uncertainty for businesses trying to determine which operational adjustments require formal reporting.
These gaps could increase compliance costs, particularly for smaller companies without the resources to interpret evolving requirements. Larger operators may be better equipped to manage the transition, although they also need clearer boundaries before expanding services.
India remains an important market because of its large gaming audience. Its ability to attract further investment will depend partly on how the new framework is implemented and how consistently authorities clarify outstanding issues.
As one industry assessment put it, “The key to unlocking that investment will be operational clarity from the Authority.”
Source:
“Does the PROG Act & Rules 2026 deliver a clear reset for online gaming in India?”, igamingbusiness.com, October 9, 2026