Online Betting and Gambling in India: Economic Threats, Cybercrime, and a Legal Framework Playing Catch-Up

Online Betting and Gambling in India: Economic Threats, Cybercrime, and a Legal Framework Playing Catch-Up

By Adv. Sarthak Rai Founder, Supremus Association

India has quietly become one of the world’s largest, and least regulated, online betting markets. Independent estimates suggest illegal betting and gambling deposits in the country now exceed USD 100 billion annually, growing at roughly 30% a year driven by cheap data, easy digital payments, and a legal framework that still leans on a 19th-century statute. This piece breaks down how the ecosystem actually works, why the law has struggled to keep pace, and what the now enacted Promotion and Regulation of Online Gaming Act, 2025 (PROGA) means for the future of India online gaming and regulation in India.

A Billion-Dollar Grey Market

The Parliamentary Standing Committee on Finance, in its July 2023 report on cybercrime, flagged four recurring typologies behind India’s illegal betting economy: cryptocurrency enabled money laundering, “mule” bank accounts opened on fabricated documents, offshore gambling platforms used to move and clean money, and lending/investment apps used as a cover.

The Financial Intelligence Unit’s findings add texture to this picture. Offshore betting operators commonly registered in Malta, Cyprus, and Curaçao, collect funds from Indian users through deceptive means, route them to overseas entities, and convert the proceeds into cryptocurrency, making the trail extremely hard to follow.

The scale of this is not abstract. RBI data from July 2024 shows that of the roughly ₹2,500 crore (USD 300 million) moving through mule accounts every month, law enforcement recovers barely 10%. Offshore betting platforms are reportedly significant beneficiaries of this “mule-as-a-service” economy. On the tax side, the DGGI’s 2023–24 Annual Report flagged 658 offshore gaming entities as unregistered or noncompliant with GST norms and as of the last Winter Session, not a single offshore gaming platform had registered with the GST department since the October 2023 deadline.

Advertising is the third leg of the ecosystem. ASCI’s 2024–25 half-yearly report flagged 890 advertisements for illegal betting platforms including 831 Instagram posts and dozens of sports fan pages allegedly paid ₹2,000–3,000 a day to display betting logos and tickers.

The common thread across all of this: India isn’t fighting one problem, but an entire ecosystem payment processors, software vendors, and advertisers that keeps illegal betting operational despite website blocks and advisories.

Why the Law Keeps Falling Behind

India’s legal response to betting is a patchwork stitched together from statutes that were never designed for the internet.

• The Public Gambling Act, 1867 still the principal gambling law in several states doesn’t define “gambling” precisely enough to say whether wagering on a cricket match is treated the same as a dice roll. It also predates the internet entirely, leaving online betting in an interpretive vacuum.

• The Information Technology Act, 2000 doesn’t prohibit online gambling directly, but empowers the government to block foreign betting websites and imposes take-down obligations on intermediaries under the 2021 Intermediary Guidelines.

• FEMA, 1999 bars foreign direct investment in lotteries, betting, and gambling businesses, and prohibits remitting winnings from horse racing or lotteries abroad.

• The Constitution’s Seventh Schedule (Entry 34, State List) gives states the power to legislate on betting and gambling  which is exactly why India now has a checkerboard of rules. Only Sikkim, Nagaland, Meghalaya, and Goa have functioning licensing regimes; Tamil Nadu and Karnataka had previously enacted restrictive laws governing online gamin, portions of which were stuck down by their respective High courts. However, the Supreme Court, in State of Tamil Nadu v. Jungle Games India Pvt. Ltd. Subsequently set aside those High Court judgments and upheld the relevant state legislations, holding that betting or wagering on games of skill can fall within the States legislative competence under entry 34 of List II.

Sitting underneath all of this is India’s oldest legal fault line in this space: the “skill versus chance” test. Courts have consistently held that games of skill rummy (State of Andhra Pradesh v. K. Satyanarayana, 1968), horse racing (Dr. K.R. Lakshmanan v. State of Tamil Nadu, 1996), fall outside gambling law and enjoy protection under Article 19(1)(g). But that doctrine, built for physical card tables, has aged poorly. It says nothing about algorithm-driven engagement, micro-transactions, or platforms deliberately designed to maximise time-on-app. The Gujarat High Court’s finding in Dominance Games v. State of Gujarat that Texas Hold’em poker fails the “predominance of skill” test — versus the Calcutta High Court’s contrary view in Indian Poker Association v. State of West Bengal shows just how unsettled this remains, even for a single game.

The Judiciary’s Uneasy Relationship with Online Betting

Indian courts have repeatedly drawn a line between skill games played physically and the same games played online treating the digital medium itself as a risk factor. In M/s Gaussian Networks Pvt Ltd v. Monica Lakhanpal, a Delhi court found that online skill-gaming for stakes could attract criminal liability under the “common gaming house” provisions, reasoning that online play carries a materially higher risk of manipulation, cheating, and collusion than a physical table. The case was later withdrawn during revision proceedings, so it isn’t binding precedent but it remains the most detailed judicial engagement with the issue to date.

The result is a legal environment where the same activity can be lawful in one state, unconstitutional to ban in another, and undefined everywhere else.

Enter PROGA 2025 and a Constitutional Question Mark

The Promotion and Regulation of Online Gaming Act, 2025 is India’s first real attempt at a centralised answer. It proposes to ban online money games involving monetary stakes outright, while regulating esports and social gaming separately, backed by a National Online Gaming Commission and restrictions on payment intermediaries processing transactions for banned platforms.

On paper, PROGA closes the skill-versus-chance loophole and brings criminal liability for operators and facilitators. In practice, it has two open problems. First, a blanket ban risks pushing users toward VPNaccessed offshore platforms the same enforcement gap the law was meant to close. Second, prohibition alone doesn’t address the psychological design mechanics (variable rewards, near-miss loops) that the WHO’s ICD-11 classification of “Gaming Disorder” identifies as the real driver of compulsive use.

The legal position has since materially changed. PROGA received Presidential assent on 22 August 2025 and was brought into force with effect from 1 May 2026. The Promotion and Regulation of Online Gaming Rules, 2026 were also brought into force from the same date, establishing the operational framework for implementation of the Act, including the Online Gaming Authority of India and mechanisms for classification, enforcement and user protection.”

The uncertainty is already reshaping the industry: several major platforms have scaled back operations, and at least one foreign investor has written off its stake a reminder that regulatory ambiguity itself carries economic cost, independent of any final ruling.

The Constitutional Stakes Nobody’s Talking About

The more interesting argument, and the one this framework tends to miss, is that unregulated online betting isn’t just a gambling policy question it’s a dignity and public health question under Article 21. The Supreme Court’s reasoning in Francis Coralie Mullin v. Union Territory of Delhi (right to live with dignity) and Bandhua Mukti Morcha v. Union of India (State’s affirmative duty to prevent systemic harm) supports the view that platform architecture engineered to exploit compulsive engagement particularly among adolescents raises constitutional concerns that go beyond simple prohibition. Read alongside Article 39(f) (protection of children from exploitation) and Article 47 (public health), there’s a credible case for a harmreduction, rights-based regulatory model rather than a binary ban-or-allow approach.

On the financial side, gaming platforms functioning as de facto payment intermediaries holding wallets, processing rapid deposit-withdrawal cycles, moving cross-border funds were, until now, largely outside the PMLA’s reporting-entity obligations. FATF’s Risk-Based Guidance for Virtual Assets already flags this as a high-risk gap; bringing gaming platforms under the same KYC, beneficial-ownership, and suspicioustransaction-reporting standards as fintechs isn’t a stretch it’s overdue.

Where This Should Go

A workable framework needs to do more than ban:

1. Phase enforcement  target high-risk offshore and real-money platforms first, then extend to domestic compliance and consumer protection.

2. Build harm-reduction into the interim mandatory age verification, spending caps, self-exclusion tools, and addiction disclosures, regardless of how PROGA’s constitutional challenge resolves.

3. Close the AML gap bring gaming platforms under PMLA reporting obligations, with real-time transaction monitoring and enhanced KYC.

4. Fix the federal ambiguity the Centre needs a clearer constitutional basis for regulating digital and financial dimensions of an activity that formally sits in the State List, likely through cooperative federalism mechanisms rather than unilateral central legislation.

5. Target the ecosystem, not just the platform payment processors, ad networks, and software vendors that keep offshore operators running are as much a part of the enforcement problem as the betting sites themselves.

The Bottom Line

India’s gambling law was built to police physical gaming houses in the 1800s. It is now being asked to regulate algorithm-driven, globally networked, financially sophisticated platforms and it shows. India’s gambling law was built to police physical gaming houses in the 1800s. It is now being asked to regulate algorithm-driven, globally networked, financially sophisticated platforms and it shows. The real fix lies in treating online gaming regulation as what it actually is: a constitutional governance problem spanning dignity, child protection, financial integrity, and Union–State competence  not merely a question of what counts as a “game of skill.”

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