India’s online gaming boom is at risk and only a central law can save it

A robust national policy will allow gaming to be the cornerstone of the the envisioned $1 trillion digital economy.

India’s online gaming industry is valued at nearly $3 billion – a number that reflects its potential as a fast-growing sector. Ironically, this is also the minimum amount the Indian exchequer loses annually in unpaid GST due to the unchecked rise of illegal offshore gambling websites targeting Indian users with impunity. While home-grown companies comply with ever-evolving regulations, offshore platforms operate outside the tax net, drain revenue, and pose serious risks to national and economic security.

This is a sector that was once among the biggest magnets for foreign direct investment (FDI) in India’s digital economy. But a series of disruptive policy changes – from retrospective GST notices to a 400% increase in GST on pay-to-play gaming – has thrown the industry into turmoil. Many businesses have shut down, thousands of jobs have been lost, and what was once a thriving, promising industry is now in survival mode. The Supreme Court is currently reviewing the retrospective GST matter, and one hopes it will provide relief. Meanwhile, companies are trying to navigate the new tax regime, consolidating and restructuring to stay afloat.

Yet, amid these challenges, one of the biggest problems remains the lack of a uniform regulatory framework. The current system is a patchwork of state laws, where some states outright ban online gaming while others allow it. Every time a state government imposes a ban, the industry has to fight protracted legal battles, and courts have repeatedly upheld gaming as a legitimate business activity protected under the Indian Constitution. However, this endless cycle of legal challenges has disrupted business continuity, deterred investment, and stifled innovation.

Beyond the economic fallout, the real danger lies in offshore gambling platforms, which continue to operate without accountability. These websites not only evade Indian tax laws but also fail to offer consumer protections, leading to increased fraud, money laundering, and gambling addiction. The only way to curb their influence is by establishing a centralised regulatory framework that clearly distinguishes games of skill from games of chance, allowing the former while strictly prohibiting the latter.

India’s online gaming sector is unique and is one of the very few startup sectors where companies are not only innovating but also profitable and scaling rapidly. Many of these companies are on the cusp of public listings (IPOs), proving that this is a sustainable, high-growth industry with long-term potential. However, to maintain this momentum, the right regulatory framework is essential – one that supports responsible gaming while allowing businesses to compete globally.

As India’s oldest and largest industry gaming body, the All India Gaming Federation has been advocating for a uniform national policy for years. There was a breakthrough in 2023 when the IT Ministry (MeitY) introduced rules to regulate online gaming. It was a critical first step, but most of the changes have not come into effect, leaving the rules, and by extension, the entire industry in limbo. While Indian companies comply with stringent domestic regulations, offshore platforms continue to operate freely, drawing Indian users and revenues away from legitimate, tax-paying businesses.

The ideal solution is central regulation through either a standalone Online Gaming Act or ideally as part of the all-encompassing Digital India Bill. A dedicated national law would ensure uniformity across states, setting clear rules for compliance, taxation, and consumer protection. In the meantime, the MeitY rules for online gaming must be fully operationalised. If necessary, the government can introduce additional user protection measures and greater regulatory oversight to strengthen the MeitY framework.

An important step to curb offshore gambling would be the creation of a whitelist of legitimate, compliant gaming companies. A regulated whitelist would benefit all stakeholders – from users and advertisers to social media platforms, government departments, and law enforcement agencies – by distinguishing legitimate operators from illegal offshore platforms. This clarity would protect consumers, guide businesses, and help authorities target bad actors more effectively.

The contribution of India's real-money gaming industry to the national exchequer is already over 1% of the total GST collection – a substantial figure. If supported with progressive, well-defined regulations, this sector can continue to be a strong economic driver, fostering innovation, job creation, and the growth of MSMEs. A forward-looking regulatory framework, underpinned by user safety and responsible gaming principles, will help India tap into this opportunity while ensuring that domestic players operate on a level playing field.

There is also a bigger opportunity at stake – India has the potential to become a global gaming hub, creating games for the world. Many of India’s leading gaming companies, including two unicorns and the only publicly listed gaming company, are already making significant investments in game studios, game development, and even AAA gaming projects. With the right regulatory backing, Indian companies can take India’s stories, creativity, and gaming expertise to a global audience.

By fostering responsible innovation, supporting MSMEs, and embracing progressive regulations, we can ensure balanced growth that prioritises consumer protection and integrity, laying a strong foundation for a sustainable and globally competitive gaming ecosystem in India.

More importantly, a robust national policy will allow gaming to be the cornerstone of the Prime Minister’s vision of a $1 trillion digital economy. India has the talent, technology, and market size to become a global gaming powerhouse, but to achieve that, we need clear, consistent, and progressive regulation. The time for a ‘One Nation, One Law’ approach to online gaming is now.