After RMG ban, can esports become India's next big gaming engine in 2026?

The year 2025 was a period of significant regulatory, structural and market changes for India’s gaming industry, which upended the business models of several gaming companies. The year also saw the introduction of comprehensive regulatory reform, the revival of esports as an official sport, and a broad industry shift away from real-money gaming (RMG) toward esports, social gaming and original intellectual property.

The new online gaming bill, called the Promotion and Regulation of Online Gaming Act (PROGA), passed in 2025, led to the nationwide ban of real-money gaming formats, including fantasy sports and paid-entry skill games. Many firms vanished overnight after the unprecedented shutdown of the RMG industry, comprising 2,000 RMG-linked startups and around 250,000 employees. Some of these gaming companies swiftly pivoted from their high-margin models to newer, uncharted avenues, such as esports, free titles, exportable game IP, the content space, and even finance.

Adding to these woes, online money gaming has found itself in the company of tobacco and cigarettes in the ‘sin category’ under GST 2.0, attracting a 40% tax. 

Future of Indian esports, especially after PROGA

The year 2025 was the year Indian esports became institutionally real. Akshat Rathee, co-founder and MD of NODWIN Gaming, says PROGA removed years of ambiguity by clearly separating esports and skill-based competitive gaming from online money-gaming formats. “That clarity changed behaviour across the ecosystem. Governments began backing state-level tournaments, brands entered without regulatory hesitation, parents and educators started viewing esports as a legitimate pathway, and Indian teams competed at global events with confidence.”

Beyond policy, 2025 delivered proof points. Esports entered the Khelo India Youth Games, Indian athletes won world championships, and India participated at the Esports World Cup. Rathee believes these weren’t symbolic moments; they signalled that esports now sits within India’s formal sports and youth-development framework.

For Animesh Agarwal, founder of S8UL Esports and 8Bit Creatives, the year 2025 felt like the first year where Indian esports began operating with structure rather than uncertainty. "PROGA brought something the industry had been missing for a long time, which was clarity. With official recognition in place, the conversations evolved from questioning the legitimacy of esports to focusing on how the ecosystem can be scaled responsibly and sustainably."

Agarwal says after the formal recognition of esports by the government, parents began to find greater assurance in it, which helped esports feel like a legitimate and well-defined career pathway. Notably, in 2025, S8UL became the first Indian organisation to be selected as a club partner for the Esports World Cup and represented the nation on a global stage, while also winning the Esports Content Group of the Year award for the fourth consecutive time.

The online gaming space also saw around $3 billion in foreign direct investment in FY25. The tax outgo surged more than 400% by 2024, after it was placed in the 28% GST bracket about a year earlier. The government’s best intentions notwithstanding, some experts see PROGA as a hastily drafted bill that has threatened the feasibility of other entertainment formats as well as complementary and dependent sectors. For example, online gaming companies contributed significantly to marketing (sponsorships and endorsements), advertising (traditional and digital), and tech infrastructure (cloud services, payment gateways, and servers) businesses.

Can esports fill the void created by RMG?

The exit of money-driven games will inevitably leave a vacuum, but stakeholders of esports, a $1.65-billion global industry with an audience of over 500 million, are optimistic. But can the segment fill the void created by the RMG ban? Industry observers say India’s gaming space mirrors what China saw in 2008–09, when regulation forced companies to pivot away from grey areas and double down on esports and video gaming. It gave birth to Tencent, a global giant in the online gaming business.

NODWIN’s Akshat Rathee believes it’s important not to frame this as esports "replacing" real-money gaming. The two are fundamentally different businesses with different revenue models, risk profiles and audiences. "What 2025 showed clearly is that esports in India is becoming structurally sustainable in its own right. We saw consistent brand investments, repeat sponsorships, rising viewership, creator monetisation, and media-rights conversations across leagues and tournaments. That's a very different value equation from RMG, and it shouldn’t be judged by the same benchmarks."

He emphasises that esports will not “fill a void” left by RMG; it will grow on its own trajectory as a sport, media property and youth-culture platform.

S8UL’s Agarwal believes that sustainability in esports does not come from quick wins; it is built through layered ecosystems. "Esports will not replace RMG on a one-to-one basis, nor should it attempt to. However, it can channel attention, talent and audiences in a more structured and sustainable direction. Over time, this approach creates meaningful careers, stronger communities, and a healthier industry overall."

Anuj Tandon, partner – India & UAE, BITKRAFT Ventures, stated, "Regulatory clarity in 2025 has been a turning point for gaming investments in India. As capital moves away from short-term models, we’re seeing stronger opportunities in game development, core technologies, and gaming-influenced interactive media platforms."

What is the single biggest unlock for Indian esports?

Esports is touted to be India’s next big youth media growth story. The twin formats of esports and free-to-play (F2P) appear well-positioned, at least on paper, to achieve RMG-like success. The country’s esports space, valued at ₹1,100 crore in 2024, is expected to grow at a 35% CAGR annually over the next five years on the back of streaming, sponsorships and tournament rights. 

F2P mobile games also dominate the world of downloads. A rising mid-core/core gamer base (200 million+) and adequate policy support can bring more brands and publishers together, helping esports unlock its full potential.

Akshat Rathee says the single biggest unlock for esports is "depth", specifically having multiple esports titles in India with stable, year-long competitive calendars. "One or two marquee events are not enough to build a global esports nation. We need several titles across mobile, PC, and console running structured leagues, seasonal circuits, and international qualification pathways throughout the year."

Once that happens, everything else compounds: "athlete development becomes predictable, teams can plan careers, brands invest long-term, and fans stay engaged" beyond single tournaments, he said, adding that 2026 will be about turning scale into structure and structure into sustained global relevance.

Nitish Mittersain, joint MD and CEO, Nazara Technologies, says, "India’s gaming sector is at an inflection point, with scalable models, original IP and global distribution coming together. Strengths in video, free-to-play and social gaming position the market for durable, long-term growth. 2026 offers a compelling window for sustained value creation."

India already has the player base, the viewership and the passion, agrees Agarwal. "What will separate us globally is how early and how well we identify, train, and support talent across titles."

He says if India can align government support, publisher collaboration and organisational discipline around talent development, "we will not just participate globally, we will consistently compete at the highest level. That is the step that turns potential into leadership."