In August 2025, the Government of India passed the Promotion and Regulation of Online Gaming Act 2025 to regulate online gaming more effectively, particularly with reference to issues of security, financial integrity and consumer protection. The Act proposes to ban Real Money Games (RMG) and promote and regulate the online gaming sector, including e-sports, educational games, and social gaming.
The rationale behind the Act is to control the diverse gaming industry and protect the citizens from several financial and health implications, such as loss of money in betting, addictive algorithms, as well as platforms where terrorist organizations recruit, radicalize, coordinate and communicate their group activities.
This analysis examines the intersection between India’s online gaming sector and national security challenges, drawing upon recent cases, empirical data, and enforcement records. The new Act argues that regulation is not only a necessary corrective but also a step towards formalizing a sector whose unchecked expansion carries profound risks. The discussion illustrates how the Act represents a critical intervention to balance economic opportunity with national security imperatives.
The diversity of users is equally notable. Platforms attract urban millennials, students, gig economy workers, and increasingly, semi-urban youth with affordable internet access. The monetisation of gaming through real-money platforms, in-game purchases, and digital wallets has generated sizeable financial flows, estimated at Rs 31,000 crore as of 2025. However, such growth has created opportunities for exploitation by criminal networks and extremist groups.
The online gaming industry in India has witnessed unprecedented growth over the past decade, transforming from a marginal to a multi-action-rupee ecosystem with millions of users. Given the push in the tech and innovation industries, as well as the creation and engagement of Internet Protocol (IP), it is expected that the gaming industry will grow to a projected market size of US$9 billion and is expected to drive investor value by US$63 billion by 2029.
According to a report, India currently houses around 591 million gamers, which is nearly 20 per cent of the global gamer population. The number of game downloads in India increased from 5.65 billion in 2019 to 9.5 billion in 2023, capturing 16 per cent of global game downloads. The mobile gaming sector dominates the market, contributing to 90 per cent of the total gaming market in India, driven by rapid technological advancements and expanding demand for gaming.
This expansion has been augmented by internet penetration from towns to metropolitan cities, the availability of affordable smartphones, and a young demographic with a preference for digital entertainment. However, alongside this growth, concerns have deepened about the misuse of gaming platforms for illicit purposes, ranging from money laundering and tax evasion to radicalisation and terror financing.
The economic and security costs of leaving the sector unregulated are equally stark. Estimates suggest that India lost over INR 25,000 crore between 2022 and 2024 due to scams, laundering, and related tax evasion through gaming platforms. These losses represent not only monetary leakage but also damage to consumer trust, investor confidence and India’s global reputation as a digital economy.
Security risks: Money laundering and financial crimes
The most pressing concern is the use of gaming platforms as conduits for money laundering. The Mahadev App case has been symbolic in this regard. The Enforcement Directorate uncovered a laundering network of over INR 6,000 crore linked to the app, involving hawala operators, benami accounts and cross-border financial flows. The Hyderabad Chinese app scam revealed another dimension, with nearly Rs 903 crore siphoned off in 2022–23 through fraudulent loan and gaming applications with links to China. Similarly, the E-Nuggets scam in Kolkata demonstrated how seemingly innocuous gaming apps were used to dupe investors, resulting in over INR 90 crore in losses.
Empirical records underline the systemic scale of the problem. The Financial Intelligence Unit–India (FIU-IND) traced INR 4,000 crore in suspicious gaming-related transactions in 2023; while recurring consumer losses and tax leakages are estimated to cost the exchequer and citizens Rs 20,000 crore per annum through online real-money gaming. This steady leakage of money through illicit gaming operations not only weakens financial stability but also creates avenues for grey money to enter legitimate markets.
The Act directly addresses these vulnerabilities by placing gaming companies under a clearer compliance regime. By mandating registration, financial audits, and alignment with anti-money laundering (AML) standards, the law seeks to close loopholes that previously allowed digital platforms to operate with limited scrutiny. This approach is consistent with international practice, where jurisdictions such as the European Union (EU) and Singapore have strengthened financial surveillance of online gaming to pre-empt its abuse by criminal syndicates.
Radicalization, laundering and extremist exploitation
Beyond financial misuse, online gaming platforms have increasingly drawn scrutiny for their potential role in facilitating radicalization. While the number of confirmed cases remains limited, the trend is disquieting. Intelligence agencies suspect that extremists could use the chatrooms for recruitment or ideological grooming, similar to what has been observed in Kashmir, where PUBG is being used for communication. These platforms—often equipped with chat rooms, multiplayer voice communication, and anonymous digital identities—provide fertile ground for radical elements to connect with an impressionable youth. In India’s case, the demographic profile of young, digitally active users makes gaming platforms a natural target for extremist narratives.
Likewise, laundering and radicalization are issues of terror financing. While the scale is smaller compared to narcotics or traditional hawala networks, evidence points to the rising use of gaming platforms to move funds for extremist groups. Reports from law enforcement agencies estimate that a large sum of money has been lost in scams through gaming-related payment systems to finance extremist activity. By necessitating Know Your Customer (KYC) compliance for users, tightening the control of digital wallets, and mandating reporting of suspicious transactions, the Act aims to cut off and minimize the avenues of financial misuse.
The Act’s features, including mandatory monitoring of content, traceability of in-game communication, and stricter data-sharing requirements with law enforcement, offer a necessary safeguard. Although such measures raise concerns about privacy and surveillance, prioritizing national security cannot be dismissed. However, it is essential to have a balance between protecting freedoms and preventing extremist misuse.
Dimensions of the new Act
Against this backdrop, the Act represents a necessary and timely intervention. Its provisions are not merely reactive; they chart a forward-looking agenda that integrates security with economic governance.
1. By formalising the registration of gaming platforms, the law will enhance transparency and accountability. This creates a level playing field for legitimate companies while discouraging fly-by-night operators.
2. The Act strengthens the consumer protection framework, safeguarding millions of ordinary users from predatory practices, fraud, and psychological harm associated with unregulated gaming.
3. The integration of financial compliance standards ensures that gaming platforms contribute to tax revenues rather than erode them. By closing loopholes, the government can redirect resources into public welfare while ensuring investor assurance in India’s digital economy.
4. Furthermore, the law tackles the national security dimension. By mandating closer cooperation between gaming companies and enforcement agencies, it positions India to pre-empt threats of laundering, radicalisation, and terror financing. While regulation cannot eliminate misuse, it significantly reduces the risks and increases the costs for malicious actors.
5. Finally, the Act situates India within global best practices. Countries across Europe, East Asia, and North America have introduced comparable regulations, recognising that gaming is no longer a trivial pastime but a strategic digital domain. By positioning its legislation with such standards, India signals to domestic users and international investors that its gaming sector is safe, credible, and forward-looking.
Potential Constitutional hurdles
(a) The Gaming Act lacks legislative competence, in as much as, in pith and substance, the Act ventures into matters within the exclusive legislative domain of the State Legislatures [Entry 34, List II, 7th Schedule]
(b) The Gaming Act overrules a consistent body of judicial decisions of the Supreme Court and various High Courts, which have drawn a constitutionally significant distinction between games of skill and games of chance, protecting the former under Article 19(1)(g) of the Constitution as legitimate trade and business. Thus, balancing regulation and growth.
(c) The Union Parliament lacks the legislative competence to enact the Gaming Act. Article 246 of the Constitution, read with the Seventh Schedule thereto, divides legislative fields between the Union and the States. The Union has sought to justify the Act by reference to various Union List entries (telecommunications, currency, inter-State trade, etc.) and even by invoking Article 47 of the Constitution, the Directive Principle mandating the State to improve public health.
The Centre’s stance is that ‘online money games’ are a social evil, causing addiction, suicides and financial ruin. Accordingly, the preamble to the Act, and its statement of objects and reasons, posits that the prohibition of ‘online money games’ is in public interest owing to the “adverse social, economic, psychological and privacy-related impacts of such games.” However, the issue of whether public interest alone can cure fundamental defects relating legislative competence is no longer res integra.
Critics may argue that excessive regulation could stifle innovation or drive users to unregulated offshore platforms. These are legitimate concerns, but they must be weighed against the demonstrable risks. The Indian Act attempts to strike this balance by emphasizing compliance without shutting the door on innovation. By nurturing a trusted environment, regulation is expected to accelerate the sector’s growth by attracting responsible investment and reassuring users.
The online gaming sector embodies both the promise and peril of India’s digital age. Its rapid expansion has created economic opportunities, cultural shifts, and new forms of entertainment. Nevertheless, the very features that make gaming attractive—its scale, accessibility, and financial integration—also make it vulnerable to manipulation by criminal and extremist actors. The misuse of gaming platforms for laundering, radicalization, and terror financing has already been documented.
Although the anxieties regarding thousands of people losing their jobs are valid, these risks can be addressed if gaming companies proactively participate with the government. Instead of viewing regulation as a limitation, app developers and platforms could seek assistance through incubation schemes, skill development programmes, or transitional tax relief to cushion the short-term disruptions.
The Gaming Act is already being subjected to constitutional challenges on several counts, including the ones discussed in this article. Whether the Act will sail through the initial hurdle and avoid a stay on its effect and operation remains to be seen. The Centre will point to instances of large losses, debt and addiction from rummy or fantasy sports. It will also be contended that the Centre is losing out on thousands of crores of tax revenue, and that the Gaming Act has been enacted in purely public interest.
Although the Act purports to promote ‘e-sports’ and is based on the objective of preserving public order and protecting public health, in substance, whether these objectives have been accomplished would eventually be determined pursuant to judicial scrutiny. On the face of it the Gaming Act is a blanket prohibition on, and criminalisation of, online games involving wagers.
The operative core of the Gaming Act is penal. Chapter III of the Act criminalises the entire class of ‘online money games.’ The Act reflects a recognition that digital transformation cannot proceed without security, and that security itself must be adaptive to the evolving technological landscape. The regulation of online gaming, then, is not about limiting freedom but about enabling safe innovation, which is an imperative for a country navigating the complexities of digital and cyber security.
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