Why are real money games banned when tobacco and lottery thrive?

The government may call online gaming a social evil in one breath, while running state lotteries in another, and stay silent on the tens of thousands who die annually from tobacco-related illnesses. Moral certainty is exercised where political costs are low and economic dependence is limited.

There is little doubt that online gaming with real money has become an addiction problem, and a ban may well have been necessary sooner. The government would certainly have examined data from platforms before reaching its decision, though it would have strengthened the debate had such evidence also been tabled in Parliament for wider scrutiny. What is striking, however, is not the intent of the ban but the manner of its passage, highlighting once again how the space for substantive parliamentary discussion on complex issues appears increasingly narrow.

The Parliament has just passed the Promotion and Regulation of Online Gaming Bill, 2025, and its impact has been swift and brutal. Within hours of the law’s passage, leading platforms began shutting down their real-money gaming operations. Thousands of jobs are at risk, investors are spooked, and an entire sector — once hailed as a sunrise industry — has been reduced to collateral damage in the State’s bid to protect citizens from its excesses. One is left to ask, though, why the government so enthusiastically encouraged such investments and widespread advertising (including in high-profile events such as IPL), and taxed this very activity in the first place, only to clamp down on it with such severity later. Another way of looking at this, is that there was action at least now.

The government’s intent cannot be faulted. Online money games have left a trail of ruined savings, addiction among the young, and even suicides. There were legitimate concerns about money laundering and misuse of digital platforms. But the remedy has been disproportionate: instead of regulating and reforming a sector worth billions, the State has opted for a blanket prohibition. The logic seems to be that since regulation is difficult, eradication is easier.

What such bans often achieve, however, is merely to drive the problem underground. Already, the risk is that Indian users will turn to unregulated offshore platforms, where neither player safety norms nor financial oversight apply. In trying to safeguard citizens, the State may have inadvertently pushed them into precisely the kind of opaque, high-risk environment it sought to shield them from.

The moral framing of the law makes this even more striking. Once the government declares that an activity is socially harmful, politically corrosive, or against the ‘public good’, the conversation shifts from regulation to morality. When the State makes morality the bedrock of legislation, the political opposition finds itself disarmed. No party wants to be seen as defending what has already been painted as vice.

This moral high ground is powerful but also dangerous. It allows Parliament to push through sweeping measures without the scrutiny and debate a complex issue deserves. It shuts down the space for nuanced disagreement — whether from industry voices, digital rights advocates, or even economists who might point to the unintended economic fallout. In effect, the government’s moral lens becomes the final word, turning policy into dogma.

Yet one must ask: if the State is so confident in wielding morality as its justification, would it show the same conviction in banning cigarettes, alcohol, or state-run lotteries? Each of these has well-documented links to addiction, financial ruin, and public health burdens. By any moral yardstick, they inflict as much, if not more, harm than online games. Yet, they are not just tolerated but actively taxed, forming a sizeable share of government revenues.

With so much global concern from financial regulators over the risks of cryptocurrencies, one wonders why the government has not chosen to ban them outright, but instead continues to tax their transactions as a source of revenue.

This reveals the selective nature of moral confidence. Certain industries are too entrenched, too politically profitable, or too culturally normalised to invite blanket bans. The government may call gambling a social evil in one breath, while running state lotteries in another. It may highlight health risks of online games, but stays silent on the tens of thousands who die annually from tobacco-related illnesses. Moral certainty, it seems, is exercised where political costs are low and economic dependence is limited.

This is where the nanny state impulse shows. Rather than trusting adults, especially its own elected legislative representatives, to make informed choices and build strong guardrails — such as spending caps, KYC norms, grievance redress, and strict advertising rules — the State has decided to legislate away the problem entirely. This approach carries echoes of India’s older policy instincts. The unintended consequence, however, is familiar too, users drift to grey markets, foreign operators fill the void, and enforcement becomes a never-ending chase.

The Bill does make a distinction in favour of e-sports and educational games, with a new national authority to promote them. That is welcome, but the exclusion of real-money skill-based games, such as rummy, fantasy cricket, and poker, from any regulated framework is puzzling. After all, the Supreme Court has previously recognised as well as having a few pending matters in this subject on the distinction between games of skill and games of chance.

The broader worry is not just about jobs or investment. It is about India’s reputation as a regulatory destination. Investors and innovators prefer clarity, not sudden carpet bans. By criminalising an entire industry, instead of setting standards for safe participation, the government risks driving entrepreneurs away from India’s digital economy at a time when it is courting global capital.

While the Bill has been passed, a more balanced approach is still possible, through subsidiary rules, consultations with stakeholders, and perhaps even judicial review. India must protect its citizens, yes, but it must also nurture its innovation ecosystem.

Good governance is not about moral grandstanding or sweeping bans. It is about building trust through smart regulation. India cannot claim digital leadership on the global stage while treating its own citizens as wards of the State.

(Srinath Sridharan is a corporate adviser and independent director on corporate boards. X: @ssmumbai.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.