Unregulated online money gaming platforms pose significant national security and economic threats, says the draft of ‘Promotion and Regulation of Online Gaming Bill, 2025', seen by Moneycontrol.
The threats include: "use of digital wallets and cryptocurrencies for money laundering and illicit fund transfers", use of platforms for "helping terror organisations", "cross-border data flows without compliance with Indian data protection laws", and "offshore entities circumventing Indian tax and legal obligations", the draft says.
"Modern online games are often integrated with social media, digital wallets, and real-time multilayer networks, making them difficult to monitor or control at state level," the drafts says.
In view of threats posed, a central prohibition framework is not only justified bur imperative, it says. "The proposed legislative action would ensure legal clarity, protect public health and order, and establish India as a digitally responsible nation, across the world, in alignment with constitutional values."
Moneycontrol had reported last month that several online gaming firms, especially those operating outside India, are increasingly using cryptocurrency to process transactions to bypass tax obligations, which could amount to thousands of crores, citing government sources.
Many offshore companies are not registered in India and some among those that are also carry out transactions via cryptocurrency, which helps them conceal transactions and they end up paying a lower tax. These are not large and prominent online gaming companies. They are much smaller in scale and operate from offshore locations such as Dubai, Cayman Islands, Cyprus, etc.
Also read: Govt’s draft online gaming bill seeks regulator to promote e-sports, online social games: Sources
The draft Bill may propose the establishment of a “National e-Sports Authority” to regulate and promote competitive gaming. It may also be tasked with ensuring that these activities are conducted within the framework laid down under the law.
The regulator will also coordinate with State governments and recognise sporting federations for integration of e-sports within policy initiatives, said sources.
Experts say that while the Bill's intention seems to be to address financial losses, suicides, money laundering, and terror financing tied to unregulated apps, it risks inadvertently fueling the black market, currently valued at over $100 billion annually, which undermines tax revenues and national security through payment channels like UPI mule accounts, hawala networks, and cryptocurrencies.
"Rather than curbing illicit activities, this prohibitive approach could push players into shadow markets, worsening fiscal losses and regulatory hurdles," said Kriti Singh, Associate Director, The Dialogue -- a New-Delhi based think-tank working on technology ecosystem.
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