Online Gaming Regulation in India: Rethinking the PROG Act, 2025

Syllabus: GS2/Governance

Context

• The Promotion and Regulation of Online Gaming (PROG) Act, 2025 was enacted to protect citizens from the harms associated with online real-money gaming and betting platforms. However, it appears to have pushed users toward illegal offshore betting platforms instead of reducing gambling activities.

About Online Gaming in India

• Online gaming in India includes casual games (puzzle, strategy, fantasy sports), Real Money Gaming (RMG) platforms, online betting and gambling platforms, e-sports and competitive gaming.
• It has witnessed rapid digital expansion due to rising smartphone penetration, cheap internet access, digital payment systems, and young demographic profile.
  • India today is among the world’s largest online gaming markets.

Growth of the Online Gaming Sector in India

• India has over 500 million gamers, and it is projected to grow significantly due to expansion of 5G services, digital payments ecosystem, increased investor interest, growth of esports and fantasy gaming.
• Around 80% of gamers worldwide are adults, with the largest group ages 18–34, while the average gamer is in their mid-30s.
• Mobile gaming has emerged as the dominant platform, with 3.6 billion players globally.
• The online gaming industry contributes through employment generation, start-up ecosystem growth, tax revenues, and technological innovation.

Governance Framework of Online Gaming

• Existing Regulatory Structure: Online gaming regulation in India remains fragmented.
• Constitutional Position: Betting and gambling fall under the State List (Entry 34) of the Constitution.
  • States can legislate independently on gambling activities.
• Union Government Oversight: The Ministry of Electronics and Information Technology (MeitY) regulates online intermediaries under Information Technology Act, 2000 and IT Rules, 2021.
• Recent Measures: The Centre has blocked thousands of illegal betting URLs, issued advisories against offshore betting apps, and strengthened cybercrime monitoring.

Rationale Behind the PROG Act, 2025

• The PROG Act was introduced to protect youth from gambling addiction, prevent financial exploitation, reduce psychological harm, safeguard digital privacy, and counter money laundering through betting networks.
• The legislation aimed to prohibit or heavily restrict online money gaming platforms perceived as harmful.

Significance of PROG Act, 2025

• Formalisation of the Sector: Brings clarity, improves investor confidence, and ensures compliance.
• Boost to E-sports Ecosystem: Recognition of e-sports as a legitimate industry aligns with global trends.
• Strengthening Digital Governance: Reflects India’s move toward platform regulation and digital accountability.
• Consumer-Centric Approach: Prioritises user safety over profit-driven gaming models.

Key Issues and Concerns in the Current Framework

• Rise in Offshore Platform Usage: Evidence suggests that users shifted from regulated domestic platforms to illegal offshore websites after the ban.
  • A study by CUTS International reported that offshore participation in Delhi NCR rose from 68.3% to 82%; Tamil Nadu from 67.8% to 83%; and Maharashtra from 66.7% to 91.7%.
  • It indicates that prohibition did not eliminate demand; it merely redirected users to less accountable platforms.
• Challenges in Enforcement: Offshore operators use advanced evasion methods such as VPNs, proxy servers, mirror websites, and encrypted messaging platforms like Telegram and WhatsApp.
  • Authorities often struggle to block these networks effectively because users quickly migrate to new domains.
• Cybercrime and Financial Fraud: Illegal betting ecosystems are increasingly linked with money laundering, hawala transactions, identity theft, and fraudulent investment schemes.
  • Fraudsters used ‘mule bank accounts’ opened through poor villagers to route illicit money.
• Weak Consumer Protection: When users engage with offshore platforms, Indian laws have limited reach, grievance redress becomes difficult, users lack legal remedies, and data protection standards are absent.
  • It creates a major regulatory vacuum.
• Limitations of Blanket Bans: Paternalistic bans often push activities underground, encourage illegal markets, and reduce state oversight, and increase criminal involvement.
  • Digital products are especially difficult to ban because online access can bypass territorial restrictions.

Global Examples

• United Arab Emirates (UAE): It introduced a federal licensing framework, strict compliance standards, deposit limits, and consumer safeguards despite historically prohibiting gambling.
  • The objective was to reduce risks from unregulated offshore activity.
• Sri Lanka: Sri Lanka is establishing a centralised Gambling Regulatory Authority, expected to become operational by 2026, to regulate offshore online gaming within a domestic legal framework.

Way Forward: Regulation or Ban?

• Shift Toward Regulated Frameworks: India may consider licensing genuine operators, mandatory KYC verification, deposit and spending limits, age restrictions, and responsible gaming tools.
• Strengthen Cyber Enforcement: Authorities should improve real-time monitoring systems, AI-driven fraud detection, coordination between States and Centre, and international cooperation against offshore operators.
• Consumer Protection Measures: A robust framework needs to include grievance redressal mechanisms, data privacy safeguards, transparency in gaming algorithms, and mandatory warnings for addictive behaviour.
• Public Awareness Campaigns: Awareness programmes should educate users about financial risks, fraudulent platforms, addiction-related harms, and safe digital practices.
• Revenue Utilisation: Tax revenue from regulated gaming can support addiction counselling, cybercrime enforcement, public awareness initiatives, and digital literacy programmes.

Source: TH