Insights

Introduction-What are loot-boxes?
The integration of microtransactions and “loot boxes” within online and mobile games has fundamentally transformed the economics of the gaming industry. A loot box typically allows a player to purchase a randomised virtual reward, ranging from cosmetic enhancements to in-game weapons through either real currency or in-game credits purchased with real money.
While this business model has proven lucrative for developers, it has simultaneously generated substantial concern among policymakers and legal scholars regarding two risks: (1) behavioural harm/addiction through “variable reward” reinforcement, and (2) monetisation pathways (if virtual items are monetisable they create secondary markets akin to betting). In India, where the legal framework governing gambling and online gaming remains largely fragmented, the debate around loot boxes acquires additional complexity.

Loot Boxes and the Indian Legal Framework
The regulation of gambling in India primarily emanates from the Public Gambling Act, 1867, an antiquated colonial statute designed to curb public gambling and the keeping of gaming houses. Section 3 of the Act criminalises the keeping of any “common gaming house,” while Section 4 penalises persons found therein. Section 5 extends these penalties to the printing or publication of materials intended to promote gaming.
The Act, however, is ill-equipped to address the digital and intangible nature of online gaming, as its conceptual underpinnings presuppose a physical location and tangible gambling instruments. Additionally, gambling is a subject falling within the State List (Entry 34, List II, Seventh Schedule of the Constitution), resulting in a patchwork of state-level enactments that differ in their definitions and treatment of games of skill and chance.
A further legal dimension is added by Section 30 of the Indian Contract Act, 1872, which declares that agreements by way of wager are void and unenforceable in a court of law. The rationale underlying this provision is the State’s disapproval of speculative and chance-based arrangements. Similarly, Section 226 of Bharatiya Nyaya Sanhita, 2023 (BNS) criminalises the keeping of any unauthorised lottery office. While these provisions predate digital commerce, they embody a consistent legislative policy that transactions governed predominantly by chance and offering monetary or valuable consideration in return for uncertain outcomes are contrary to public policy.
Applied to loot boxes, this jurisprudence suggests that if the outcome of a purchase is determined by random number generation and the user pays real or monetisable consideration in the expectation of receiving an item of value, the dominant element is chance, thereby approximating gambling. Alternatively, where the reward is purely cosmetic, non-transferable and lacks any monetary value, such activity may fall outside the scope of gambling as traditionally conceived. However, the growing presence of third-party platforms that allow players to sell or exchange virtual items complicates this distinction, thereby blurring the boundary between ordinary in-game purchases and gambling-like activities.

The 2025 Online Gaming Bill: A Step Forward with Silent Gaps
Recognising the limitations of the outdated colonial framework, the Government of India introduced the Promotion and Regulation of Online Gaming Bill, 2025 to establish a uniform and centralised system for regulating online gaming and related financial transactions. One of the Bill’s key features is the introduction of the term “online money game,” defined as any online game in which a user pays or deposits money, or any other form of stake, with the expectation of winning monetary or other rewards.
The expression “other stakes” has been defined broadly to include digital or virtual credits, tokens, coins or other items obtained through payment. On this basis, loot boxes purchased with real money or with in-game currency bought using real money could reasonably be treated as falling within the meaning of “other stakes.” Accordingly, when such loot boxes provide randomised rewards that carry potential value, the activity may be viewed as participation in an “online money game,” bringing it under the regulatory scope of the Bill.
However, the Bill does not specifically mention “loot boxes” or “randomised reward mechanisms.” It also does not require developers to disclose the probability of obtaining specific items or to maintain transparency about the random number systems that determine these outcomes. The Bill is primarily designed to regulate online games that involve wagering or direct monetary gains, whereas many loot boxes, especially those offering cosmetic or non-transferable items may not technically fall under this definition.
This omission creates a regulatory gap, as randomised reward systems that do not provide direct financial returns could still cause harm but remain outside formal regulation. Moreover, while the Bill empowers the proposed Online Gaming Authority to classify and license online games, it does not establish a clear process for assessing specific monetisation practices such as in-app purchases or microtransactions.
As a result, enforcement authorities may find it difficult to determine whether particular gaming features qualify as “online money games” in the absence of explicit legislative direction. Thus, although the Bill marks a major step forward from the 1867 framework, its ability to address the specific risks posed by loot boxes remains limited unless supplemented by detailed rules or interpretive guidelines.

Crafting a Targeted Regulatory Response for Loot Boxes
While Indian jurisprudence offers a clear conceptual test for distinguishing between games of skill and games of chance, applying this test to loot-box mechanisms remains complex. Unlike traditional games of chance, loot boxes are embedded within skill-based games, where the random element is secondary but monetised. The risks they pose extend beyond financial loss to include behavioural conditioning, impulsive spending, and the rise of unregulated secondary markets.
To ensure a balanced and effective framework, India should adopt a two-tiered regulatory approach-
(a) prohibitive regulation for loot boxes involving transferable or monetisable rewards, which operate similarly to gambling, and
(b) protective regulation for cosmetic or entertainment-based loot boxes that still employ manipulative design.
The latter should be governed by transparency and consumer protection norms rather than outright prohibition. This can be achieved by including a separate provision in the 2025 Bill or through delegated legislation empowering the Online Gaming Authority to define “loot boxes” and impose obligations such as:

• Probability disclosure – Mandatory display of the odds of receiving specific rewards.
• Age verification and spending limits – Restrictions on minors and caps on monthly spending.
• Ban on secondary monetisation – Prohibition of transferring or selling rewards outside the game.
• Transparency audits – Independent review of randomisation algorithms for fairness.
• Consumer warnings – Clear notifications indicating that rewards are randomised.

Conclusion
The Public Gambling Act, 1867 and similar statutes, rooted in a pre-digital era, are inadequate for regulating virtual gaming economies while the Promotion and Regulation of Online Gaming Bill, 2025, though progressive, remains incomplete due to its silence on loot boxes and lack of specific consumer safeguards. Judicial principles distinguishing skill and chance are conceptually valuable but fail to address the psychological and financial risks these mechanisms pose. India must therefore move beyond applying outdated gambling laws and adopt a dedicated, transparent, and consumer-focused regulatory framework that reflects the realities of modern online gaming.