India’s Ban on Betting Apps & Curbing Money Laundering

General Studies Paper-2

Context

• Recently, the Parliament of India passed the ‘Promotion and Regulation of Online Gaming Bill, 2025’ that is designed to curb addiction, financial ruin and social distress caused by predatory gaming platforms that thrive on misleading promises of quick wealth.

Need For Promotion & Regulation of Online Gaming Bill 2025

• India’s online gaming sector is booming — with over 650 million smartphone users, a youthful population, and a rapidly growing digital economy.
• According to the MeitY data:
  • Over 45 crore Indians have been negatively affected by online money games.
  • Estimated ₹20,000 crore in financial losses have occurred due to unregulated platforms.
  • Cases of suicide, addiction, and family distress linked to compulsive gaming have been reported.
• Economic Gaps: The sector is projected to reach ₹66,000 crore by 2028, growing at 14.5% CAGR.
  • Illegal offshore betting markets receive $100 billion annually from India, causing an estimated $45 billion loss in tax revenue.
• Money Laundering Threat: Online money gaming platforms — often operating in legal gray zones — enabled:
  • Untraceable financial transactions, especially via offshore accounts and cryptocurrencies.
  • False promises of profit, luring users into high-stakes betting.
  • Capital flight, undermining domestic financial stability.
• Crypto Risks: India already has nearly 100 million crypto wallets, making it easy for users to bypass the banking system entirely. It could:
  • Increase untraceable financial transactions;
  • Facilitate capital outflows;
  • Undermine efforts to combat money laundering;
• Social & Psychological Harm: The World Health Organization (WHO) classifies gaming disorder as a health condition, marked by:
  • Loss of control over gaming habits;
  • Neglect of daily activities;
  • Continued play despite harmful consequences.

Key Features of the Bill

• The Bill takes a dual approach: it bans harmful online money games while encouraging constructive digital gaming. It promotes:
• E-sports: Competitive digital sports requiring strategy and teamwork.
• Online social games: Skill-based, casual games for entertainment and learning.
• Educational games: Tools for cognitive and academic development.
• On the other hand, Bill prohibits:
  • Online money games involving betting or gambling, regardless of whether they’re based on skill or chance.
  • Advertisements and financial facilitation of such games.
• Institutional Framework: The Bill establishes:
  • An Online Gaming Authority to oversee regulation, policy support, and strategic development.
  • A national-level legal framework to unify state policies and safeguard digital sovereignty.

Major Concerns Surrounding the Online Gaming Bill, 2025

• Blanket Ban on Real-Money Gaming: Industry bodies like the E-Gaming Federation and All India Gaming Federation argue that the blanket ban could cripple a legitimate, job-creating sector, affecting over 2 lakh jobs.
• Risk of Driving Users to Illegal Platforms: Banning regulated platforms may push users toward offshore and dark web gambling sites, which are harder to monitor and more prone to money laundering and terror financing.
  • These platforms often use cryptocurrencies, mule bank accounts, and mirror websites to evade detection.
• Investor Sentiment and Economic Fallout: The Indian gaming industry, projected to reach $9 billion by 2029, may face a massive drop in foreign investment.
• Enforcement Challenges: Implementing the ban is complex due to the ease of domain switching, app cloning, and cross-border operations.
• Warrantless searches and broad enforcement powers could raise privacy and civil liberty concerns.

How Bill Combats The Issue of Money Laundering?

• Complete Ban on Online Money Games: All games involving monetary stakes — whether skill-based or chance-based — are prohibited.
  • It includes fantasy sports, poker, rummy, and betting apps.
  • By banning real-money games and severing their financial lifelines, the Bill:
  • Disrupts laundering networks that rely on gaming platforms as fronts.
  • Protects users from financial exploitation and addiction.
  • Preserves India’s digital economy from reputational and fiscal damage.
• Ban on Financial Facilitation: Banks and financial institutions are barred from processing payments for banned games.
• It cuts off the formal financial pipeline that enables laundering.
• Prohibition of Advertisements: Advertising of online money games is outlawed, preventing platforms from attracting new users into laundering schemes.
• Strict Penalties: Violations can result in up to 3 years imprisonment, fines up to ₹1 crore, or both.
• Centralized Oversight: An Online Gaming Authority will monitor compliance and coordinate enforcement across states.
  • It helps close jurisdictional gaps that offshore platforms exploit.

Other Related Initiatives to Counter the Risks of Online Gaming

• Information Technology Act, 2000 and Related Rules: The IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 laid down norms for online gaming platforms.
  • Section 69A of the IT Act empowers the Government to block access to illegal websites or links.
• Bharatiya Nyaya Sanhita, 2023: Section 111 penalises unlawful economic activities and cybercrimes.
  • Section 112 prescribes punishment for unauthorised betting and gambling.
• Integrated Goods and Services Tax Act, 2017 (IGST Act): Illegal and offshore gaming platforms are regulated under the IGST Act.
  • Online money gaming suppliers must register under the Simplified Registration Scheme.
• Consumer Protection Act, 2019: It prohibits misleading and surrogate advertisements.
  • The Central Consumer Protection Authority (CCPA) has powers to investigate, penalise and take criminal action against offenders.

Conclusion & Way Forward

• The Bill reflects a strong intent to protect users from addiction and financial harm — but its sweeping scope has sparked debate about whether it sacrifices innovation and economic growth in the process. There is a need to:
• targeted regulation instead of blanket bans.
• clear definitions distinguishing games of skill from gambling.
• robust oversight mechanisms to prevent misuse without stifling innovation.