Online money gaming: Financial Institutions to stay away

– Saloni Khant | finserv@vinodkothari.com

The Promotion and Regulation of Online Gaming Bill, 2025, passed by the Parliament, received the assent of the President on Friday, 22nd August, 2025. The law will come into force on its publication in the Official Gazette. As soon as it becomes effective, the immediate implication of the Bill will be to prohibit online money gaming services.

Online money game is defined as “an online game, irrespective of whether such game is based on skill, chance, or both, played by a user by paying fees, depositing money or other stakes in expectation of winning which entails monetary and other enrichment in return of money or other stakes”. In other words, an online game, irrespective of whether it involves skill or chance or combination, where money (or other stake) is paid to play, with the expectation of winning (which may either be money or other enrichment), will be barred. 

Except for a few state laws, the field of online gaming was hitherto unregulated in India. Wide media publicity had taken such games to quite a level of popularity. 

The Bill now seeks to prohibit the online money gaming sector with multifold objectives as stated in its preamble ranging from protecting the youth from adverse social, economic, psychological and privacy-related impacts to safeguarding the integrity of financial systems.

While the business itself becomes illegal, does it have implications for financial institutions? Section 7 specifically provides that “No bank, financial institution, or any other person facilitating financial transactions or authorisation of funds shall engage in, permit, aid, abet, induce or otherwise facilitate any transaction or authorisation of funds towards payment for any online money gaming service.”

On a plain reading, the section seems to suggest that the banking system will not be used for making any payments for online gaming services. Facilitation of financial transactions, or authorisation of funds, refers to the cashflows that are associated with online money gaming.

However, looking at the wide construct of the section, we would suggest financial institutions refrain from having any exposure, including as a private equity investor, in any online gaming service provider. The words “aid, abet.. or otherwise facilitate” seem wide enough.

In any case, no lender will like to have an exposure on a business which is declared illegal.

Of course, it remains an open question as to how would existing exposures be recovered, as the value of the businesses will soon be substantially reduced.