India’s Betting-App Ban Could Fuel Money Laundering: Experts Warn of Unintended Fallout
India has banned real money betting apps to curb fraud and addiction. But experts warn the India betting-app ban could push users to offshore casinos and crypto platforms, fueling money laundering.
Parliament Moves to Ban Real Money Gaming
India has taken a dramatic step in reshaping its online gaming industry. The government recently moved legislation to ban real money stakes on betting apps, sending shockwaves across the $3.8 billion domestic market.
At first glance, the reasons for this move seem straightforward. Rising concerns over addiction, money laundering, and financial frauds have prompted lawmakers to crack down. Union officials argue that protecting citizens from social and financial harm justifies tough action.
However, analysts warn that the India betting-app ban could have unintended consequences, including boosting offshore gambling and crypto-driven money laundering.
The Risk of Driving Users Offshore
History shows that prohibition rarely eliminates demand—it simply shifts it elsewhere. Industry experts believe the India betting-app ban will push players toward offshore casinos and international gambling platforms.
Many of these sites already accept Indian users without strict Know Your Customer (KYC) checks. Deposits and payouts often happen through cryptocurrencies like Bitcoin or Ether, bypassing the regulated banking system altogether. With more than 100 million crypto wallets already in India, the infrastructure for such transactions is firmly in place.
Instead of reducing risks, critics argue, the ban could actually fuel illegal money flows, making it harder for authorities to track financial crimes.
A Growing Market Cut Short
Before the ban, India’s online gaming industry was on a growth trajectory. Fantasy sports platforms such as Dream11, Games24x7, and Mobile Premier League (MPL) had become household names, especially during the Indian Premier League (IPL) cricket season.
Even a hefty 28% tax on deposits had not deterred millions of users. Analysts estimated that while India’s local industry was valued at $3.8 billion, it was only scratching the surface of the country’s massive $100 billion gambling demand—most of which leaks to overseas operators.
By enforcing the India betting-app ban, the government risks losing over $2 billion in annual tax revenue, while allowing foreign platforms to fill the gap.
Possible Shifts in Gaming and Sponsorship
The legislation will not just impact gaming platforms. It could also ripple across sports sponsorships and digital entertainment.
Fantasy-sports apps have been among the most aggressive sponsors of domestic leagues, including the Pro Kabaddi League. Their investments helped revive enthusiasm for traditional sports in India. With the ban, such funding will likely dry up, leaving organizers to look for new partners.
Meanwhile, some users may switch to social gaming apps that offer in-app rewards without monetary stakes. These platforms could gain traction as players seek alternatives. Similarly, e-sports may benefit from increased legitimacy, as the new law explicitly supports competitive gaming without gambling elements.
Relief for Banks, But New Problems Ahead
One sector that may welcome the India betting-app ban is the banking industry. During the IPL season, local betting apps strained financial infrastructure by processing thousands of real-time wagers through rupee-denominated accounts. Banks faced mounting pressure to keep transactions smooth.
The ban may ease this burden. Yet, the relief could be temporary. As users migrate to offshore apps and crypto transactions, banks might face capital outflows without visibility, raising fresh challenges.
Addiction and Law Enforcement Dilemmas
For individuals already addicted to fantasy sports betting, the new law is unlikely to end the habit. Instead, they will look for offshore platforms offering anonymity and easy access. This shift could worsen the very money-laundering menace that the government aims to curb.
Enforcement also raises questions. The law proposes three-year jail terms and fines for operators. But critics argue this is excessive, especially when police resources are needed for serious frauds. One notorious example was the fake IPL tournament in Gujarat, where laborers posed as players to scam Russian gamblers.
Analysts warn that focusing on shutting down domestic betting apps could drain law-enforcement capacity, leaving less bandwidth to tackle real scams and organized crime.
The Bigger Picture: Lessons from Prohibition
The parallels to the U.S. Prohibition era are hard to ignore. Just as banning alcohol fueled underground markets, the India betting-app ban may drive gambling further into the shadows.
While the intention behind the legislation—protecting citizens from addiction and financial ruin—is valid, its execution risks unintended fallout, from lost tax revenue and sponsorships to a rise in crypto-driven black-market betting.
Policymakers may need to balance prohibition with smarter regulation, ensuring that India’s growing appetite for online entertainment does not turn into a pipeline for illegal money flows.
