As India grapples with its approach to online gambling, a new report released by the Digital India Foundation (DIF) reveals the impact of the country's lack of unified control over the industry.
The report titled "Illegal Gambling and Betting Markets in India: Scale and Driving Factors" indicates that India has become a significant hotspot for unlicensed offshore operators.
This has raised concerns about money laundering, tax evasion, and online financial crimes in the country, which have been criticized by opponents of online gambling for over a decade.
Despite strict laws prohibiting most forms of gambling, the rapid digitalization of financial transactions and widespread internet access have provided fertile ground for the flourishing of unregulated gambling platforms.
A recent study by the Indian Parliament's Standing Committee on Finance highlights the scale of these activities, showing that the industry's illegal deposits exceed $100 billion annually, growing at a rate of 30% per year.
This multi-billion-dollar industry is primarily controlled by offshore entities operating in regions like Curaçao, Malta, and Cyprus, exploiting regulatory loopholes in India.
Authorities have repeatedly attempted to curb these activities, mainly through website blocking and issuing warnings.
However, due to the decentralized and inconsistent enforcement measures, illegal gambling networks continue to exist and attempt to evade regulatory scrutiny.
The involvement of cryptocurrencies, social media promotion, and a vast network of mule accounts complicates law enforcement efforts.
Rise of Offshore Gambling Operators
The DIF report highlights how unlicensed online gambling platforms have exploited digital advancements to establish a foothold in India.
The non-compliant websites listed by DIF include pari-match-in.com, stake.bet, and 1xbetind.in.
By leveraging payment technologies such as cryptocurrencies and social media platforms, these operators have found ways to circumvent legal barriers and reach millions of Indian users.
The report notes that these platforms often register in jurisdictions with minimal regulatory oversight, pooling funds through complex networks, then channeling them into cryptocurrency transactions.
One of the most concerning trends is the use of "Indian mule" accounts by overseas gambling operators.
The DIF report points out that, according to data from the Reserve Bank of India (RBI), mule accounts process about $300 million of illegal funds monthly, with only 10% being recovered by law enforcement agencies.
These accounts act as conduits for illegal transactions, allowing offshore platforms to transfer funds undetected.
The investigation also uncovered a disturbing pattern: individuals are often lured by job opportunities or monetary rewards to provide their bank account details to criminal groups.
These accounts are then used to handle large sums of money, which are subsequently closed or repurposed for other uses.
Tax Evasion Crisis
Despite new tax laws requiring offshore gambling platforms to register with the Indian Goods and Services Tax (GST) department, no foreign operator has complied with the regulation since its implementation on October 1, 2023.
According to the Directorate General of GST Intelligence (DGGI), investigations into 658 offshore gambling companies have revealed widespread tax evasion, prompting calls for stronger enforcement mechanisms.
The tax evasion crisis not only affects operators but also financial intermediaries that facilitate transactions. Payment gateways, shell companies, and digital wallets play a crucial role in processing and concealing unlicensed gambling revenues.
The government has launched investigations into several such entities, but their large operational scale poses significant challenges to law enforcement.
Advertising Drives Users
Unlicensed gambling platforms have adopted aggressive marketing strategies to attract Indian users, utilizing digital advertising networks and influential partnerships.
According to the Indian Advertising Standards Council (ASCI), there has been a sharp increase in gambling-related advertisements on social media platforms like Instagram, YouTube, and Telegram.
ASCI's latest report flagged 890 illegal gambling ads, with 831 on Instagram alone.
The advertising strategies employed by these platforms often involve deceptive practices, including false endorsements, misleading promotional offers, and targeted campaigns during major sporting events like the Indian Premier League (IPL).
The use of "betting quotes" on social media fan pages has become particularly common, with page owners reportedly earning 2,000 to 3,000 rupees per day by showcasing gambling-related content.
Influencer marketing has also played a key role in the expansion of these platforms. Many internet celebrities with large followings openly promote gambling apps, offering referral bonuses and discount codes to encourage sign-ups.
Due to the lack of strict regulation on influencer promotions, curbing such activities is challenging.
Payment Ecosystem: Loopholes for Money Laundering
Illegal gambling operators have seamlessly integrated into India's digital payment ecosystem, exploiting financial regulatory loopholes. The report identifies several methods used to facilitate transactions, including:
– Unified Payment Interface (UPI) transactions: Many platforms accept UPI payments through major providers like Paytm, Google Pay, and PhonePe. Funds are initially processed through legitimate commercial accounts before being transferred to offshore entities.
– Cryptocurrency transactions: The anonymity of cryptocurrencies makes them a preferred method for laundering money. Offshore operators frequently convert gambling proceeds into digital assets, making it difficult for authorities to track the flow of funds.
– Shell companies and payment gateways: A vast network of shell companies and unregulated payment gateways facilitate gambling transactions. These entities act as intermediaries, processing payments without immediately raising alarms.
A case study highlighted in the report details how investigators tracked transactions from Indian gamblers to overseas accounts through digital wallets.
In one case, funds were collected through a network of 56 shell companies, all controlled by foreigners.
By conducting layered transactions across multiple accounts, criminals were able to obscure the origin of funds before converting them into cryptocurrencies.
Enforcement and Regulatory Gaps
Despite multiple warnings issued by the Indian government and the blocking of several gambling websites, these efforts have been largely ineffective.
The adaptability of offshore operators allows them to circumvent restrictions by launching mirror sites and using virtual private networks (VPNs), maintaining user accessibility.
Regulatory agencies also struggle to effectively enforce digital advertising restrictions. Although platform policies prohibit gambling-related ads, illegal promotional activities continue to thrive due to weak enforcement.
A recent survey found that over 1,040 gambling-related ads played on Meta platforms (including Facebook and Instagram) directly violated company policies.
Moreover, although the Reserve Bank of India has the authority to implement stricter controls under the Payment and Settlement Systems Act, enforcement against gambling payment processors has been inconsistent.
Experts believe that a more proactive approach is needed, including direct coordination with payment service providers to blacklist suspicious transactions.
Renewed Call for a Comprehensive Regulatory Framework
The report concludes that combating illegal gambling requires a holistic, ecosystem-based strategy, rather than isolated enforcement actions. Key recommendations include:
– Strengthening digital advertising regulation: Cooperation between government agencies and digital platforms is crucial for curbing gambling propaganda. Search engines and social media companies should be required to downgrade the ranking of gambling-related search results and flag unauthorized ads.
– Payment blocking measures: Financial institutions should implement stricter due diligence mechanisms to detect and block transactions related to illegal gambling.
– Blacklist and whitelist mechanisms: Establishing a public blacklist of illegal operators and a whitelist of licensed platforms can help consumers distinguish between legal and illegal services.
– Stricter influencer marketing guidelines: Influencers found promoting illegal gambling platforms should be penalized.
– International cooperation: Given the transnational nature of illegal gambling activities, India should collaborate with global financial regulatory and law enforcement agencies.
To promote safer gaming practices, the All India Gaming Federation (AIGF), the Indian Fantasy Sports Federation (FIFS), and the Electronic Gaming Federation (EGF) have collaborated to launch a Code of Ethics (CoE).
The aim is to establish uniform standards across the industry while strengthening responsible gambling and ethical advertising.
A key requirement of this center is the implementation of annual third-party audits and structured reporting mechanisms to enhance the industry's transparency and accountability.
Reportedly, the center is modeled on internationally recognized best practices, emphasizing the cultivation of responsible gambling habits.
Its guidelines include basic measures such as age verification, Know Your Customer (KYC) procedures, and user control features that allow players to set spending limits or opt for self-exclusion.
The center of excellence applies to all online gaming operators affiliated with these federations and engaged in skill-based real-money games, currently serving over 500 million Indian users.
