Online money games are prohibited in India from 1 May 2026, and the tax on the years before that survives the prohibition

The Promotion and Regulation of Online Gaming Act, 2025 came into force on 1 May 2026, and it does not regulate online money games. It prohibits them, together with their advertising and the banking that pays for them, and it reaches a service operated from outside India for players inside it. The definition that carries the prohibition is drafted to make the old skill and chance argument irrelevant, so a rummy or fantasy platform is in the same position as a casino product. What the Act promotes is a narrower set: e-sports recognised under the National Sports Governance Act, 2025, and online social games played without stakes, both of which register with an authority rather than being left alone. The liability a closed platform leaves behind is the tax, and on 27 May 2026 the Supreme Court held the stake, not the commission, to be the measure of it.

What counts as an online money game

For two decades the question put to a court was whether a game was one of skill or one of chance, because a game of skill sat outside the state gaming statutes. Section 2 of the Act closes that route by defining an online money game as a game played by paying a fee or depositing money or other stakes in the expectation of winning something in return, and by saying in terms that it does not matter whether the game is based on skill, chance or both. The classification that used to decide the case is now expressly beside the point.

Three consequences follow for a product team reading its own cash flows. A game with an entry fee and a prize funded from entry fees is within the definition whatever the proportion of skill in play. A game with no stake is outside it, and a subscription or a one time access fee is not a stake, which is the line the definition of an online social game draws. And a game that pays out in something other than money is not for that reason outside, because the definition speaks of monetary and other enrichment.

Three prohibitions, not one

Section 5 prohibits offering an online money game or an online money gaming service, and it extends to aiding, abetting or inducing the offering. Section 6 prohibits advertising, in any medium, anything that directly or indirectly promotes or induces a person to play one. Section 7 prohibits a bank, a financial institution or any other person facilitating a payment from engaging in, permitting or facilitating a transaction towards payment for an online money gaming service.

Each one catches a different party, and the second and third catch people who never ran a game. An agency placing a campaign, a creator paid to promote a platform, a payment aggregator settling deposits and a bank authorising them are each addressed by a section of their own. A compliance programme written only against section 5 leaves those exposures untouched.

Section 1(2) states that the Act applies to an online money gaming service offered within India and also to one operated from outside India. An offshore operator with Indian players is within the Act by its own terms, and the question for that operator is enforcement rather than application.

What the offences carry

Section 9 fixes the punishments. A contravention of section 5 or section 7 is punishable with imprisonment up to three years or a fine up to one crore rupees, or both. A contravention of section 6, the advertising prohibition, carries imprisonment up to two years or a fine up to fifty lakh rupees, or both. A second and every subsequent conviction under section 5 or section 7 carries a minimum of three years, extending to five, with a fine of not less than one crore rupees and up to two crore. Section 10 makes offences under sections 5 and 7 cognizable and non-bailable, which decides how a first enforcement step looks: arrest without warrant, and bail from a court rather than at the police station.

Section 11 deals with offences by companies. An officer is liable where the offence was committed with that officer's consent or connivance, or is attributable to neglect on that officer's part, with an exception for an independent or non-executive director who was not involved in the decision. That exception is drafted around involvement in the decision, so board minutes that record who decided what are the material a director's defence is built from.

What is still permitted, and what registration means

The Act is not only a prohibition. Section 8 allows the Central Government to constitute an authority, or designate an existing one, to determine whether a game is an online money game, and to recognise, categorise and register online games. The authority constituted under it is the Online Gaming Authority of India, and the Promotion and Regulation of Online Gaming Rules, 2026, notified by the Ministry of Electronics and Information Technology on 22 April 2026, came into effect with the Act on 1 May 2026.

Two categories can be registered. An e-sport, as section 2 defines it, is an online game played as part of a multi sports event in organised competitive form, recognised under the National Sports Governance Act, 2025, with an outcome determined solely by skill, and the definition permits a registration or participation fee and prize money based on performance while stating that it shall not involve the placing of bets, wagers or any other stakes. An online social game is one played without stakes, which may charge a subscription or a one time access fee, offered for entertainment, recreation or skill development.

Registration under the Rules is a digital certificate valid for up to ten years unless suspended or cancelled earlier, and it carries continuing obligations: age verification, parental controls and time limits, a grievance mechanism, retention of traffic data and metadata on computer resources located in India, and display of the registration or determination details. The Rules also require a bank or a financial institution to verify the determination order or the certificate before facilitating a payment, which converts section 7 from a prohibition a bank must avoid breaching into a check it must perform.

The practical point for a business that believes its product is outside the prohibition is that the belief is not self executing. The authority determines whether a game is an online money game, and the factors reported to bear on that determination are the presence of an entry fee or deposit, the extent of any wager, the expectation of a reward and the structure of the revenue model. A determination is the document a bank, an app store and an advertiser will ask to see.

The tax position of the years before the prohibition

A platform that closed on 30 April 2026 did not close its tax position. In Directorate General of Goods and Services Tax Intelligence v. Gameskraft Technologies Private Limited (2026 INSC 595, 27 May 2026) the Supreme Court decided the treatment of the years in which these games were offered. As reported, the Court held that an organised game played for money on an uncertain outcome is betting and gambling for the purposes of the goods and services tax whether or not skill is involved, that what the operator supplies is an actionable claim rather than an intermediary service, that the measure of the tax is the full face value of the amount staked and not the platform's commission or rake, and and that the amendments made in 2023 to the Central Goods and Services Tax Act, 2017 were clarificatory, so demands for earlier periods stand.

Those holdings are taken from the judgment as reported rather than from the Court's own words, because the text retrieved for this note runs to the submissions and not to the findings. The case title, the citation, the appeal numbers and the date are from the Court's own record.

Two things follow. The exposure is computed on deposits, so it is larger than the revenue a platform recognised, and a company that measured its reserve against commission has under reserved against the decision. And the exposure sits with the company and its officers after the business has stopped, which makes the order of events in a wind down matter: a solvent liquidation that distributes before the demand is quantified is the shape that goes wrong.

What a current file has to settle

For an operator, the questions are whether any product still takes a stake, in any form, including one dressed as a fee; whether advertising and affiliate arrangements have been terminated rather than paused; and what the deposit based computation does to the figure carried in the accounts.

For a bank, an aggregator or a platform that merely distributes, the question is whether the verification the Rules require is being performed before funds move, and against which document.

For a business that is inside the permitted categories, the question is registration: which category it falls in, whether the recognition the e-sport definition requires exists, and whether the obligations that come with a certificate are in place rather than planned.