Even before the dust settled on the taxation turf, a fresh storm could be raging on the virtual route to make real money, pushing a clutch of online games under the money laundering lens. But will it help spot the rogue players?

Real money gaming startups just had a breather in their long fight for lower GST with the Supreme Court slapping a stay on the proceedings against 49 real money gaming (RMG) startups earlier this year. But the relief was short-lived as the government has geared up to get the RMG startups under the Prevention of Money Laundering Act (PMLA). The government has also met four major RMG players, including Dream11, Games24x7, and MPL, to discuss the matter in the presence of officials from the Financial Intelligence Unit (FIU) under the finance ministry.

The players can wager and win real money in these games. The RMG options range from traditional casino games like poker, blackjack, and roulette to fantasy sports, rummy, and skill-based competitions. While games of skill are considered legal in most states, games of chance, such as casino games, face stricter scrutiny. The Public Gambling Act of 1867 governs gambling laws in India, but it does not specifically address online gaming.

Real money games make up about 86% of the revenue for India’s INR 31,938 Cr ($3.7 Bn) online gaming sector. An increasing popularity is likely to catapult it to an INR 78,551 Cr ($9.1 Bn) industry by 2029. The exponential growth rate of the segment and the country’s traditional negative stand against ‘games of luck’ involving monetary transactions always kept the RMG startups on the edge. It was more so in the absence of strict financial controls on the segment.

Due to lack of regulation in RMG, which is often classified as betting and gambling, there’s no cap on the amount of money a player can spend, anyone can participate with any amount, and there are minimal limits or oversight mechanisms in place. That was the first cause for concern for the government. The sheer volume of money flowing in and out of these platforms – even through domestic RMG firms – has been another major worry.

No wonder, the government stepped up vigilance on offshore platforms involved in online gaming and betting in the past few years, and raised the GST liability on RMG deposits to 28%, besides slapping a 30% TDS on winners. If real money gaming comes under the money laundering laws, it will have stricter obligations, including know-your-customer (KYC) requirements, and tracking and reporting of suspicious transactions, industry insiders said.

Under the PMLA, any intermediary that handles such financial flows, is classified as a ‘reporting entity’. In fact, physical casinos with which RMG firms are often compared, are already obligated to report under the Act.

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