When Karnataka proposed legalizing online betting on horse racing, it appeared to strike directly at the heart of India’s most controversial digital law: the Promotion and Regulation of Online Gaming Act, 2025 (PROGA). On paper, PROGA leaves little room for ambiguity. It prohibits all forms of online money gaming and gives itself overriding authority over any conflicting state laws.
With PROGA still unenforced and facing a constitutional challenge before the Supreme Court, the state’s proposal has reignited a fundamental question: who really gets to regulate online gaming in India— the Center or the states? More importantly, the episode highlights a deeper policy dilemma.
Can an absolutist ban survive in an ecosystem where skill-based games, hybrid monetization models, esports platforms, and real money gaming increasingly blur traditional legal distinctions? According to Vidushpat Singhania, a sports and gaming law expert involved in legislative drafting from Krida Legal, Karnataka’s proposal is being widely misread as a defiant gesture against central authority. In reality, he argues, it draws strength from decades of settled law.
Why Karnataka’s Move is Not as Radical as it Seems
Singhania revealed, “Karnataka’s recent move to legalize online betting on horse racing is not so much a departure from existing legal principles as it is an extension of long-standing judicial precedent.”
The precedent he refers to is the Supreme Court’s landmark ruling in Dr. K.R. Lakshmanan v. State of Tamil Nadu, where horse racing was classified as a game of skill rather than gambling. That distinction has had lasting consequences. States such as Tamil Nadu, Maharashtra, Karnataka, and West Bengal have long permitted betting on horse racing in regulated, offline settings, while several race clubs have already facilitated online betting in practice.
Singhania points out that PROGA, despite its sweeping language, has not yet crossed the most critical threshold of enforcement. “The Promotion and Regulation of Online Gaming Act 2025 (“PROGA”), places a blanket ban with overriding effect over laws of states. However, the PROGA hasn’t been enforced as on date and is furthermore facing a constitutional challenge before the Hon’ble Supreme Court,” he explains.
This legal limbo matters. Under the Constitution, betting and gambling fall squarely under Entry 34 of the State List, granting states primary legislative competence. Karnataka’s proposal, therefore, does not reinterpret PROGA so much as operate within the space that still legally exists while the Act’s validity remains undecided.
At the same time, Singhania acknowledges that the move could carry wider implications. While it may not be a coordinated challenge today, “Karnataka’s action may serve as an early indicator of a broader trend, with other states potentially moving to reassert their legislative authority over online gaming.” Whether that trend materializes will depend almost entirely on what the Supreme Court ultimately decides.
PROGA’s Blanket Ban and the Limits of Prohibition
PROGA’s most contentious feature is its absolutist design. By prohibiting all online money gaming, without carving out exceptions for skill-based formats, it attempts to resolve regulatory complexity through outright prohibition. Singhania believes this approach is fundamentally misaligned with how digital entertainment now functions.
“The blanket prohibition imposed by the PROGA reflects an absolutist policy stance that is increasingly difficult to sustain in a digital economy where the boundaries between skill, chance, and entertainment continue to evolve,” he says.
The risk, he argues, is not merely theoretical. Prohibition often displaces activity rather than eliminating it. “Prohibition usually pushes the activity underground, fueling illegal markets and driving users towards circumvention methods such as VPNs, offshore websites, and other options,” Singhania explains, noting that such environments operate without consumer safeguards, responsible gaming measures, or regulatory accountability.
International experience supports this view. Many jurisdictions have moved away from blanket bans in favor of licensing regimes that focus on harm reduction, transparency, and compliance. Regulation enables governments to impose age verification, spending limits, anti-money laundering controls, and advertising restrictions, which are tools that simply do not exist in unregulated markets.
In India’s case, the challenge is magnified by the sheer diversity of gaming formats. Skill-based real money games, fantasy sports, esports monetization, and hybrid social platforms do not fit neatly into traditional gambling definitions. Singhania argues that ignoring these distinctions risks stifling innovation while failing to achieve PROGA’s stated goal of consumer protection.
Business Fallout, Investor Anxiety, and the Road Ahead
While constitutional debates continue, the business impact of PROGA has already been profound. Singhania notes that the mere anticipation of enforcement has forced drastic strategic shifts across the industry.
“The expected notification of the commencement of the Act and promulgation of the PROGA Rules has already led to almost all major real money gaming platforms, including Dream11, PokerBaazi, MPL, Zupee, etc., either suspending or significantly scaling down their operations in India,” he says.
The law’s compliance framework leaves little room for nuance. “The PROGA makes it crystal clear that any form of online money gaming, along with aiding, abetting, advertising, marketing or supporting/ facilitating financial transactions for the same are strictly prohibited and can invite steep fines and/or imprisonment,” Singhania explains.
For startups, RMG (real money gaming) operators, and esports platforms alike, this has created a climate of extreme caution. Many companies are pivoting away from monetized gaming altogether, exploring content-driven or creator-led entertainment models instead. Others are looking outward, seeking jurisdictions with clearer and more predictable regulatory regimes.
“This uncertain environment is likely to push investors to shift to jurisdictions having clearer regulatory structures rather than seeking to make a splash in the Indian online gaming market,” Singhania warns. Even non-monetized gaming formats, he adds, must prepare for higher compliance costs tied to registration and monitoring requirements.
Looking forward, Singhania argues that India’s long-term interests lie in regulatory coherence rather than prohibition. Drawing from global best practices, he advocates a system that categorizes games based on risk and monetary involvement, while mandating responsible gaming safeguards.
“A balanced regulatory model for online gaming focuses on regulation rather than prohibition, with clear categorization of game formats based on risk, potential consumer harm, and monetary involvement,” he says.
Ultimately, the Supreme Court’s decision in the pending constitutional challenge will shape the future of India’s online gaming ecosystem. Regardless of the outcome, Karnataka’s horse racing proposal has already exposed the fragility of PROGA’s one-size-fits-all approach. In doing so, it has forced policymakers, businesses, and courts alike to confront the unavoidable reality that India’s digital gaming economy is difficult to regulate.
