Money laundering a major threat to India’s booming online gaming sector, finds new report

A new report from the Digital India Foundation (DIF) has raised alarm over the growing threat of money laundering within India’s online gaming sector. The report highlights the urgent need for stricter regulations and enforcement to protect the country’s digital economy from illegal activities linked to online gambling and betting platforms.

According to the report, India’s real money gaming (RMG) sector has become a key player globally, with revenues expected to reach $7.5 billion in the next five years. With millions of gamers participating daily, the industry has also spurred employment in areas such as fintech, cloud services, and cybersecurity. However, the rapid growth has brought challenges, with offshore betting sites and in-game currencies increasingly being used for money laundering and even terror financing.

The study estimates that the illegal gambling market in India handles more than $100 billion annually. Despite efforts to block these platforms, many operators bypass restrictions using VPNs and mirror sites. Another issue raised is the misleading advertisements by influencers promoting illegal gambling sites, which attract users with exaggerated claims and false promises. Payments made through cryptocurrencies and cash further complicate the problem, making transactions hard to track.

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Stronger oversight needed
The DIF report calls for several measures to curb illegal activities and strengthen oversight. A key recommendation is forming a specialised task force to combat illegal operators.

This task force would monitor platforms for compliance with KYC (Know Your Customer) regulations, promote digital payments, and ensure financial discipline.

The report also suggests creating a whitelist of legal operators, requiring all gaming platforms — domestic and offshore — to register under the GST Act. This would help payment gateways and service providers distinguish between legal and illegal platforms. Additionally, the government is urged to block transactions with known illegal operators and collaborate internationally to tackle cross-border gambling issues.

Arvind Gupta, co-founder of DIF, stressed the importance of urgent intervention. “Given its high growth rate, contribution to government revenues, and the millions of users it attracts, the online gaming sector needs immediate protection from money laundering threats. Despite efforts to regulate the industry, illegal platforms continue to find ways to operate through mirror sites and false advertising,” he said.

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Sector needs better regulation
The absence of consistent regulations and a dedicated regulatory authority has left the gaming sector vulnerable to fraud. The report recommends that the Ministry of Electronics and Information Technology (MeitY) implement a clear framework to govern online gaming. Stronger financial integrity measures, such as regular audits and robust KYC mechanisms, are also proposed to reduce risks.

The DIF emphasises the need for cooperation between ministries, financial institutions, and gaming platforms to combat illegal activities. Public awareness campaigns and better enforcement strategies are also essential to protect users and promote a safer gaming environment.

The report underscores that timely action is crucial to safeguarding the sector’s future, given its potential to create over 250,000 jobs by 2025.