Taming the Wild West of illegal online gambling in India

Vulnerable users, especially the youth, have fallen into the web of illegal betting apps and are getting trapped in debts. To recover or pay off large sums of debts, they often turn to informal borrowing channels and risk facing harassment from loan sharks. Some may even take unfortunate drastic steps to escape the financial and emotional distress caused by illegal betting.

Additionally, globally there have been instances of illegal gambling platforms becoming a conduit for money laundering and even terror financing posing a threat to the larger national security. They are also known to dupe the bettors through trickery and manipulation.

Harms to consumers, government, and industry

Such platforms not only lead users into financial travails, but also cause massive losses in tax revenue to the government. According to a report by Think Change Forum, during the 2023 World Cup, illegal betting apps have cost the exchequer an estimated Rs 2 lakh crore. This is also harming the legitimate online gaming companies that seek to comply with all applicable laws of the land - not only commercially, but for also is adversely impacting the perception. Notably, the online gaming sector is a vital pillar in India’s ambition of becoming a trillion-dollar digital economy by 2035, which is projected to double its annual revenue to $6 billion by 2028 according to a recent report. To this end, a sector with such promise needs to be supported with adequate regulatory frameworks, backed by effective enforcement mechanisms, that can establish trust between the government, industry and consumers.

Steps to Curb Illegal Betting

In an attempt to stop the proliferation of the illegal online betting ecosystem, the government has undertaken several salutary measures. As many as 174 illegal betting apps have been blocked by MeitY under Section 69A of the IT Act. In March 2024, the Central Consumer Protection Authority (CCPA) issued an advisory warning of stringent action against the advertisement, promotion, and endorsement of online betting and gambling by celebrities and influencers. More stringent rules for Unified Payment Interface (UPI) channel are also being considered to clamp down on the operation of these platforms.

Despite concerted efforts by the government, these prohibited platforms continue to spread their tentacles. However, establishing a centralized registration process can go a long way in weeding out these platforms and enhancing consumer protection within the online gaming sector. The process can entail a simple submission of company particulars like, among others, PAN/TAN/CIN, company registration details, promoter details, proof of Indian corporation, and proof of tax payment.

This basic registration process would foster transparency and accountability by establishing a comprehensive database of legitimate online gaming intermediaries that are compliant with the applicable laws in the country. This would empower the government and enforcement authorities to conduct a first-level check against the database to ascertain whether a particular entity is complying with the laws of India, which can then inform the next course of action in terms of any prosecutorial or investigational activities.

For instance, such a system would enable the Ministry of Information & Broadcasting ability to crack down on illegal online betting advertisements more effectively. Additionally, it would facilitate MeitY's endeavors in blocking illicit platforms and curbing the proliferation of new URLs. From a consumer standpoint, it would also enable the Ministry of Home Affairs to seamlessly protect users from illegitimate platforms. Importantly, in the context of the tax loss to the exchequer, it will empower the Finance Ministry capacity to ensure better tax compliance and combat tax evasion. It will also enable end users to exercise due diligence to avoid engaging with dubious websites.

An Open, Safe, Trusted and Accountable Internet

Union Minister of State Mr. Rajeev Chandrasekhar has highlighted the need to create an open, safe, trusted, and accountable (OSTA) internet for the Digital Nagriks of India. The vision aims to create a digital ecosystem that is transparent and safe for its users. A basic registration will likely be a step in this direction and can help avert incidents that have cost the government and users monetary and psychological distress.

The registry of platforms will not signify an approval of gaming format, the legitimacy of which may still be determined by an appropriate regulatory body notified under the IT Rules. Platform approval may, however, act as a first step following which the regulatory body, once notified, can consider format approval. Similar efforts are already underway in the financial sector to curb illegal lending apps. Reportedly, the RBI is contemplating establishing a Digital India Trust Agency (DIGITA), which will act as a vital checkpoint for the verification and authorization of lending apps operating in India.

In summary, a new cross-border challenge to the Indian state has emerged on the back of the proliferation of the digital economy, which will require a concerted and whole-of-government approach to address national security and consumer protection risks. A national registry of compliant online gaming intermediaries will act as a pivotal checkpoint against bad actors that promote illicit activities in the garb of online gaming and flout the laws of India.