Banning Real Money Gaming: Freedom, Addiction, and the Mai-Baap Sarkar

Examining claimed market failures, government intervention, and the regulatory alternatives that were ignored

It’s not often that you get one clean-and-cut story that at the same time showcases:

Government’s natural tendency to consolidate more power and reduce citizens’ freedoms,
their swift movement in doing so,
in a growing industry that has a large number of business-to-consumer users,
and the overwhelming discourse, even among the otherwise basic economics educated individuals, is actually cheering them on in this move.

But, that’s what happened.

The government (of India) recently came out with a bill that effectively banned ‘real money gaming’ (RMG). It banned apps that allowed or facilitated gambling or fantasy leagues, where people bet actual money.

It’s a 10 page bill and can be read here (link) if one is interested. It passed on Friday, 22nd August 2025 after the President Droupadi Murmu signed on it. In about 4 days from the time it received union cabinet approval (19th August), it also cleared the Lok Sabha and the Rajya Sabha. And, it received near unanimous approval everywhere. Surprising alacrity.

The minister Ashwini Vaishnaw while talking of this bill in the Parliament, cited a study stating “45 Crore people are adversely affected, and face a loss of more than INR 20,000 Crore” (link to PIB’s official statement). That’s about INR 445/person. Not sure if those are annual figures or cumulative over the past 5-8 years that the industry has been active.

Image generated using Google Gemini

Key Points from the Bill

The bill states that the lack of “a coherent and enabling legal framework has hindered the sector’s structured development” and of lack of “promotion of responsible gaming practices” requires urgent policy intervention and support mechanisms.
That the youth and economically disadvantaged have faced serious social, financial, psychological, and public health harms; the games use manipulative design features, addictive algorithms, bots etc.
The unchecked expansion has been linked to unlawful activities including financial fraud, money-laundering, and tax-evasion practices; possibly linked to financing of terrorism too.
It categorises ‘e-Sports’ as online games specifically relying on physical dexterity, mental agility, strategic thinking and similar skills. And these involve no bets (on self or others). In addition, it lays out the intent to promote it within the broader framework for sports promotion.
Creates provisions for an agency/authority to monitor or take note of future transgressions
There’s punishment (monetary and imprisonment) for both running of online money gaming services as well as running of advertisements

Discussions Around The Ban

There’s been some discussion around this.

The financial ruins that many youth brought up on themselves/their families, the high levels of addiction leading to ‘wasted youth’, no skill development, general harm caused to society (and to self), as well as incidents of suicides caused by the financial ruin being a few of the concerns raised. There was even something on this money being ‘dead money’ — as against the money in, say, FMCG/consumer goods. This money ‘just goes to the pockets of the companies’ and apparently doesn’t lead to the 3-4x multiplier effect associated with the purchase of, e.g., a bread, a shoe, or an automobile due to the impact on economy via manufacturing, logistics, retail, service etc.

On the other side, there has also been discussion and defence — on it providing high levels of employment and high levels of taxes. And this sudden death knell to it renders all that useless.

But, disappointingly, with the exception of the ever insightful Pranay Kotasthane and RSJ through their public policy newsletter (titled: India Policy Watch #2: Game Over), I’ve not come across articles talking of the arbitrary curtailment of freedom and the general mai-baap sarkar (nanny state) behaviour at play.

Of Double Thank-Yous and Mai-Baap Sarkars

Milton Friedman, the Economics Nobel Laureate states (via source):

One set of ideas was embodied in The Wealth of Nations, the masterpiece that established the Scotsman Adam Smith as the father of modern economics. […] Adam Smith's key insight was that both parties to an exchange can benefit and that, so long as cooperation is strictly voluntary, no exchange will take place unless both parties do benefit. No external force, no coercion, no violation of freedom is necessary to produce cooperation among individuals all of whom can benefit.

Two willing, consenting parties enter into a transaction — one selling a cup of coffee + snack for INR 400 and the other willingly buying it. And sitting in that wi-fi enabled air-conditioned café for 3 hours. Both parties are better off with that transaction. Thus a ‘double thank you’.

You could step-in and say that the person is being exploited and overpaying for a cup of coffee; put in place a price-cap stating coffees in restaurants shouldn’t be sold above a maximum price of INR 150. You’ll now have a scenario of cafés trying to maximise for customer turnover instead of customer comfort (not investing in air-conditioner, free wi-fi etc.). They’ll be pushing customers to move out faster => more customers served => more overall revenue (instead of maximising for value/transaction).

The intent in being the ‘mai-baap’/nanny of that individual and preventing them from paying more, was no doubt noble. But, by intervening in the free market activity at play, you’ve made both parties (the café and the individual) worse-off. And, there’s a small matter that public policy should be judged on outcomes and not intent.

Purely from a moral and philosophical point, it also bears noting that you’ve curtailed freedom to do things that they otherwise would’ve wanted to.

Of Market Failures and Government Intervention

For reasons of freedom curtailment and worse outcomes from government interventions, they deserve a closer look instead of a free pass.

The free transactions between two parties may also have ‘externalities’ — costs or benefits that are not captured in the value of the transaction between them. Pollution caused by factories is an example of cost (or negative externality). The polluting factory and the customer are happy. But there is a cost of pollution borne on all others who are not party to this transaction. Hence regulations and fines, or taxes against pollution.

On the other hand, vaccinations (boosting herd immunity) are an example of benefit (or positive externality) not captured in the ‘double-thank you’ transaction. Some argue that education and healthcare have the positive externality and hence a government intervention (as a provider of that service) is justified.

A family dealing with a drug-addict would incur a financial, relationship, and stress-related negative externality. And the government argues RMG imposes a similar negative externality on family. Thus, the need to step in.

Information asymmetry (due to opaque algorithms, manipulative designs) and bounded rationality (addiction impairs judgment, undermining truly 'free' and 'consensual' transactions) are two other market failures cited for this governmental intervention.

Dude, Where’s My Market Failure?

Critical questions follow from above:

Is the claim for those stated market failures indeed one?
Is the case strong enough to impose the other costs that such government interventions impose?
Was banning the best/only alternative?

And, I say no to all three of these. At the very least, the latter two.

RMG as Dopamine Delivery, Not Information Fraud

Without getting into the debate of skill versus chance (on a spectrum of chess to coin-toss), we can reframe these games as being in the dopamine delivery game.

For a fee or commission, they’re giving unpredictable rewards. Some people pay for caffeine; their users pay for the thrill. No specific odds are promised nor are guaranteed rewards offered. People enter with optimism and risk-taking aptitude, and not contractual probability expectations. Casino games, such as roulette are different. The die is presumed unbiased, the slots equally probable.

So, the ‘information asymmetry’ argument doesn’t hold ground because the odds aren’t promised.

The government also claimed that the companies rig the algorithm. If that was the case, wouldn’t the solution be to (i) prove it and (ii) take the guilty party to court for fraudulent practices?

The negative externality to the family due to financial, emotional, and relational stress is, arguably, the personal responsibility of the individual. As with alcohol, increase the minimum age to above, say, 25. And personal responsibility should extend to cover the argument of bounded rationality too.

Besides if, let’s say at an upper end, there are about 5% of the users who are seriously and perilously addicted to the games, there’s 95% of users who are not. In wanting to ‘solve’ for the 5%, through this blunt intervention, you’re also negatively impacting the other 95%. Even if one were to generously grant that the ban makes the problem suddenly vanish for the 5% (and they gain benefits) what’s the cost and benefit calculus that justifies the smaller (but to 19x users) cost that’s been imposed on the other users?

You can’t have both the scenarios — of “governments not entering into your bedroom” and “governments protecting from personal responsibility against stupid decisions”.

So, this was the disappointing bit — that people who are strongly in favour of the former are supporting the mai-baap sarkar in preventing us from making ‘stupid’ decisions in our personal lives.

Here’s the kicker though: the prevention is often justified as protecting ‘vulnerable others’. The implicit message becomes: ‘I can handle this choice responsibly, but they cannot’ and we trade someone else’s freedom because of an implicit superiority.

Regulatory Options versus Banning

Even if one we were to concede that the government intervention was necessary and one differs from me regarding the first two questions (and I am okay to concede that; that’s not a hill I wish to die on; I am not a player nor am in any direct or indirect way associated with the industry) was banning the best option available?

Consider a few options, and one could’ve implemented any or a combination of these options:

Increase the Know-Your-Customer (KYC) requirements around the user
1. As part of KYC, one could be mandating the minimum age (at 18 or 25 years) and/or
2. Include the income tax returns (!) if one were to be really really keen on making sure that the user is financially responsible
Increase the sin tax to increase the cost of participating, as the government does with alcohol and tobacco
Utilise some of the tax money towards Public Service Advertisements (PSAs):
1. PSAs to educate the citizens in general on the perils of gambling or precautions one should take before getting into it, or,
2. Add a 10-30 second pause before completion of any single financial transaction (before topping up the wallet or starting a game with money) the way there are anti-tobacco ads before movies
3. De-addiction sites if it does actually become such a widespread epidemic (it hasn’t!)
Regulate advertising of RMGs:
1. Put in similar guardrails on RMG as one does on tobacco or alcohol, preventing direct advertising
Information Transparency:
1. Analogous to how insurance industry releases data of their pay-outs against claims made, make the data on winning versus playing listed (prominently) against each of the games available on a given platform

Not all these solutions are equal in effectiveness or good solutions. They are just better than the current solution.

Other Un(?)intended Effects

Where’s the policy consistency for a business or an investor to take decisions? Would there be common cause taken up because the social media apps are reducing the attention span of the next generation?

Rough Precedent: The previous tragic precedent in such a context (of arbitrary and investment environment harming move) was of the retrospective tax imposed on Vodafone in 2012. We’ve moved 2 steps forward and 1 backward by banning a large and flourishing industry overnight. Without much of a whimper.
The slippery slope of next victim of protection: Given the all-round deterioration of the quality of news channels and the alleged rise of resultant polarisation, should we ban all TV news options and move back to the era of state-owned broadcaster only?

All bans make industries go underground. How does this go underground, after having so many of the users? Will they shift to e-sports as the government hopes? Or, will they shift to VPN and other routes?
Governments, across the world, have a tendency to increase their power. Freedom curtailments are hard to claw back once lost. And thus, it’s in all our better interests in the face of these arbitrary curtailments to raise the voice even if a given curtailment doesn’t directly affect us.

The tragedy of this bill isn’t that it killed an industry. It’s that the mai-baap state barged in again into a domain popular with the youth and, without warning, shut it down. What’s worse, few voices — young or otherwise — seem to care. The state trusts its citizens less and less with freedom, and the citizens, in turn, seem indifferent to losing it.

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