The Kerala government on Wednesday decided to resume the state lottery, which was banned a fortnight ago.
Online draws, however, would be prohibited and brought under the Gambling Act.
Disclosing this after a Cabinet meet, Chief Minister Oommen Chandy said the details would be worked out later.
"The legislation to ban online lotteries will be brought in the current session of the assembly itself," he said.
Chandy said he had recently written to the Union Home Minister Shivraj Patil, seeking more powers for states to control the sale of lotteries from outside the state.
Kerala banned all lotteries on January 27 in the wake of a Supreme Court stay that curbed illegal lotteries from outside the state.
The decision had sparked widespread protests, as it rendered thousands of lottery vendors and agents unemployed in the state.