A natural reaction to being grabbed or bitten, even play- fully, is to swat at the cat. Physical punishment may cause your cat either to fear you or to engage in even rougher play.
Timing is everything.
The next step is to shun the cat for the next ten minutes. This means paying absolutely no attention to the cat. Don't lecture or scold the cat and don't pick it up to put it in a separate room. Any attention at this point can be reinforcing, so totally ignore the cat. This is precisely the way a kitten learns to inhibit his biting when playing with another kitten.