Are the stakes too high: Implications of bringing online real-money gaming companies under the Prevention of Money Laundering Act, 2002

In January 2025, the Enforcement Directorate undertook an investigation into Fairplay¹ (a betting application illegally streaming Indian Premier League cricket) and four other firms, which revealed that these firms assisted Fairplay in facilitating payments abroad under the guise of import payments.² Subsequently, in March 2025, the Directorate General of Goods and Services Tax Intelligence ramped up its enforcement actions by blocking the websites of several offshore gaming entities and mule bank accounts, as these were being used to carry out illegal activities such as betting, money laundering, and tax evasion.³  

In a move seeking to curb the occurrence of similar illegal activities, the central government is now considering bringing online Real-Money Gaming (“RMG”) companies under the purview of the Prevention of Money Laundering Act 2002 (“PMLA”). Specifically, the proposal seeks to designate online RMG companies as Reporting Entities (“REs”) under the PMLA.⁴  

What happens if RMG companies are classified as REs? If RMG companies are brought within the ambit of the PMLA, they would, like other REs, be required to comply with the various obligations prescribed under the PMLA. Some of the key compliance requirements are outlined below:  

1. FIU Registration and Filings 

If classified as REs, RMG companies would be required to register with the Financial Intelligence Unit – India (FIU-IND)⁵ via the FINgate portal before commencing operations. Post-registration, REs must comply with ongoing reporting obligations by furnishing specified information to the Director, FIU-IND in the prescribed format. 

The following reports must be filed by REs: 

1. Cash Transaction Reports: (a) All cash transactions exceeding ₹10 lakh (ten lakh Indian Rupees) or equivalent in foreign currency, on a monthly basis by the 15th of the succeeding month; (b) Series of cash transactions below ₹10 lakh (ten lakh Indian Rupees) individually but aggregating to more than ₹10 lakh (ten lakh Indian Rupees)  in a month, also by the 15th of the succeeding month. 
2. Suspicious Transaction Reports (STRs): Any suspicious transactions, whether or not conducted in cash, must be reported within 7 (seven) days of detection. 
3. Cross-Border Wire Transfers: Transactions exceeding ₹5 lakh (five lakh Indian Rupees) (or foreign currency equivalent), where the origin or destination of funds is India, must be reported monthly. 

In addition, REs must designate a Principal Officer and a Designated Director and communicate their details to the Director, FIU-IND. The Principal Officer is responsible for filing the required reports and must retain copies of such reports for official record-keeping. 

2. Enhanced KYC 

As REs, RMG companies would also be required to undertake enhanced KYC of their users, including: 

1. Verifying the identity of clients and beneficial owners.⁶ 
2. Authenticating clients via Aadhaar or through other alternative means (for persons ineligible for Aadhaar), for specified transactions^7.8 
3. Verifying the purpose behind specified transactions and the intended nature of the relationship between the transacting parties.⁹  
4. Submit records maintained to the Director.¹⁰  
5. Conducting due diligence of clients using ‘reliable and independent sources of identification’^11. 
6. Furnishing information, as and when required by the Director.¹² 

3. Records Management and Retention 

Further, RMG companies would also be required to: 

1. Maintain records of the identity of clients and beneficial owners as well as account files and business correspondence relating to its clients.¹³  
2. Maintain comprehensive records of transactions between REs and clients¹⁴ for 5 (five) years from the date of the transactions between them.¹⁵ 

These compliance obligations would likely require significant internal restructuring for online RMG platforms. Enhanced due diligence, reporting, and transparency measures would also increase operational overheads. Further, if the government chooses to extend the scope of the PMLA to cover offshore online RMG platforms, a critical challenge will be determining suitable authentication mechanisms.  

4. Conclusion 

The Central Government’s proposal to bring online RMG’s under the PMLA is particularly significant considering the regulatory U-turn taken on the decision to regulate RMGs through designated self-regulatory bodies vide the amended IT Rules.¹⁶ This move signals a hardening stance towards the RMG sector, with the government increasingly positioning even skill-based RMG platforms as akin to gambling.  

India's approach aligns with international trends. For instance, the United Kingdom's Gambling Commission requires operators to comply with the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017,¹⁷ while Singapore's Remote Gambling Act mandates strict AML compliance.¹⁸ Similarly, Malta's Gaming Authority imposes comprehensive due diligence requirements on licensed operators.¹⁹  

The proposed regulatory change also carries significant economic implications. As of FY24, the Indian gaming market was  USD 3.7 billion (approx. four billion Dollars) and is expected to reach USD 9.1 (approx. nine billion Dollars) billion by FY29, growing at a CAGR of 19.6% (approx. seventeen per cent).²⁰ Currently, the Indian gaming market is 1.1% (approx. one per cent) of the global gaming market of USD 324 billion (three hundred twenty-four billion Dollars).²¹ With a strong emphasis on building and scaling high-quality games, India now represents ~20% (twenty per cent) of the global gaming user base and contributes approximately 15.1% (approx. fifteen per cent) (around 8.6 billion) of global gaming app downloads.²² Over the coming decade, the projected size of the Indian gaming market will breach USD 60 billion (sixty billion Dollars) by 2034, generating  20x more job opportunities, with over 2 million (two million) new jobs expected to be created.²³ Enhanced PMLA compliance could increase operational costs by an estimated 8-12% (eight to twelve per cent) for legitimate operators, potentially leading to industry consolidation and raising barriers to entry for startups.²⁴ However, improved regulatory clarity might attract greater institutional investment and enhance consumer trust in the long term, benefiting compliant operators who can absorb initial compliance costs.²⁵ 

Online RMG companies should proactively develop robust internal compliance frameworks rather than adopting a wait-and-watch approach. Specifically, companies should: (1) implement enhanced KYC procedures for high-value transactions; (2) develop automated suspicious transaction monitoring systems; (3) appoint designated compliance officers with PMLA expertise; and (4) engage with industry associations to provide collective feedback to regulatory consultations.  

In a regulatory landscape characterised by state-specific variations, the move to bring online RMG companies under the PMLA demands broader stakeholder consultations. A collaborative approach that distinguishes between legitimate skill-based platforms and problematic offshore operators would better serve the dual objectives of preventing financial crime while supporting innovation in India's growing digital gaming economy. 

DISCLAIMER 

This article is for information purposes only. Nothing contained herein is, purports to be, or is intended as legal advice and you should seek legal advice before you act on any information or view expressed herein.  

Although we have endeavored to accurately reflect the subject matter of this article, we make no representation or warranty, express or implied, in any manner whatsoever in connection with the contents of this article.   

No recipient or reader of this article should construe it as an attempt to solicit business in any manner whatsoever.