With the new central Act on online gaming involving real money set to possibly change the industry via new restrictions or even entirely eliminate sections of it, Karnataka’s own proposed regulatory mechanisms have become a point of interest. State Electronics Minister Priyank Kharge had also recently expressed reservations about the Act, saying it was a hasty move.
The Promotion and Regulation of Online Gaming Act, 2025, which received presidential assent on August 22, bars parties that “indulge or engage in the offering of online money game and online money gaming service”. It also bars involvement in advertisements to promote these gaming services. Further, banks and financial institutions are barred from facilitating or authorising financial services and transactions for such online gaming services.
Contravening the provision barring offering these gaming services may lead to a three-year prison sentence and/or a Rs 1 crore fine, while the punishment for advertising may attract a fine of Rs 5 lakh and imprisonment up to two years. Authorisation of funds for these services attracts the same punishment as offering gaming services, while the penalties are enhanced for all repeat offences.
The Act also holds liable “every person who at the time the offence was committed was in charge of, and was responsible to the company for the conduct of that part of the business…” along with directors, managers or other officers who either consented to an offence or allowed it through neglect.
It also makes no distinction between games of skill and games of chance.
What concerns has Priyank Kharge expressed?
In a statement on social media on August 19, Kharge criticised the Act as a “knee-jerk blanket ban” done without consultation of other states or stakeholders, highlighting the loss of a revenue stream of Rs 20,000 crore via Goods and Services Tax (GST) and income taxes. He also pointed out that it would put jobs at risk, with 2,000 gaming start-ups in the country. It was also argued that there had been Rs 23,000 crores worth of Foreign Direct Investment in the last five years, while there had also been an ecosystem created by these companies via spending Rs 7,000 crores each year on advertisements, cyber security, data centres, etc.
“Bans don’t stop addiction or suicides. Instead, they push users to unregulated offshore platforms worth ₹8.2 lakh crore annually where the government has no control at all,” he added.
Story continues below this ad
Kharge warned that these unregulated platforms could be used for money laundering, data theft, and terror financing. As an alternative, he suggested whitelisting and regulating legitimate platforms and enforcing the IT Rules 2021.
What steps has Karnataka taken to regulate online gaming?
Prior to the central law, Karnataka was preparing a draft legislation to deal with the question of regulation. In 2021, the Karnataka High Court struck down amendments to the Police Act, which would have blocked gambling in the state, as they did not sufficiently distinguish “games of chance” and “games of skill”.
Recently, online gaming company Head Digital Works challenged the central law before the Karnataka High Court, arguing that the sections that block online gaming with money are violative of several sections of the Constitution.
The proposed legislation, the Karnataka Police (Amendment) Bill, 2025, would have made this distinction while blocking online betting, wagering and gambling for those games which were not games of skill. It envisaged establishing an Online Gaming and Betting Regulatory Authority to help make these distinctions and deal with issues of licenses and unauthorised platforms. It also proposed a jail term of up to three years and/or a Rs 10,000 fine for aiding, abetting or promoting restricted gambling. The current status of the Bill is unclear.
Story continues below this ad
Tamil Nadu is another state where the high court had struck down an attempt at a blanket ban. This being the case, the state instead has a series of regulations and restrictions on gaming with real money online.
Under the Tamil Nadu Online Gaming Authority (Real Money Games) regulations, minors are explicitly prohibited from playing, while Know Your Customer verification with an Aadhaar and mobile OTP is mandatory to create a gaming account. Caution messages are also mandated to pop up if players play for over an hour, along with daily, weekly and monthly monetary limits.
It also bars logins between midnight and 5 am.