Online Gaming Laws in India

Contents

1. Introduction.

2. How Online Games is distinguished in India – Game of Skill and Chance.

3. Judgement of Courts on Online Gaming.

4. Introduction of Central Rules for Real Money Games.

5. Taxation Laws on Gaming Platforms.

6. Exchange control requirements for betting and gambling in India – FEMA requirements.

7. How to Establish an Online Gaming Company.

8. Challenges faced by Gaming Platforms in India.

9. Recent Online Gaming Scams

Introduction

Online games and gambling in India are regulated by the Public Gambling Act 1867 and the Information Technology Act 2000. The Public Gambling Act has been adopted by Uttar Pradesh, Delhi and Madhya Pradesh whereas other states have enacted laws regulating gaming according to their concerns. It includes the Karnataka Police Act 1963, Bombay Prevention of Gambling Act 1887, Tamil Nadu Gaming Act and so on.

In India, the States have the exclusive power to regulate betting and gambling, under Entry 34, List II of the Constitution. As such, there is no set or fixed law regulating the gaming sector, and this applies to online gaming too. However, recently the central government has also imposed certain responsibilities on gaming entities by appointing Ministry of Electronics and Information Technology as the central regulatory authority, amendments to the Information Technology Act 2000 and the Information Technology (Guidelines for Intermediaries and Digital Media Ethics Code) Rules 2021.

At the moment, real-money gaming (RMG) or pay-to-play formats make up 57% of the market, and 24% of the 507 million gamers are paying customers. The impressive numbers and growth have certainly led to greater scrutiny, with the legality of certain games, especially in the RMG space.

How Online Games is distinguished in India – Game of Skill and Chance.

The Indian gaming law has differentiated gaming into two types – game of chance and game of skill which determines whether it is gambling or not. Under Indian law, games of skill are generally considered legal, while games of chance are generally considered illegal. The legal distinction between games of skill and games of chance is based on the relative importance of skill and chance in determining the outcome of the game. If the outcome of a game is predominantly determined by skill, then the game is considered a game of skill and is generally considered legal. On the other hand, if the outcome is predominantly determined by chance, then the game is considered a game of chance and is generally considered illegal.

Factors that affect the outcome of any game may include the degree to which the player’s skill level affects their chances of winning, the extent to which the player can make strategic decisions that affect the outcome of the game, the role of chance in the game and the extent to which the player can practice and improve their skill at the game.

The most gripping debates have been around the preponderance of skill or chance in certain popular games like Ludo and Rummy. one of the earliest recorded instances of the game of chance vs game of skill debate in a legal context is a case from 16th-century England, in which a court ruled that the game of skill of dice, also known as “hazard,” was a game of chance, while the game “craps” was a game of skill. This case set a precedent for the legal distinction between games of chance and games of skill that has been followed in various forms in many jurisdictions.

Judgement of Courts on Online Gaming

1. Madras High Court decision on ban of poker and rummy – The TN Prohibition of Online Gaming and Regulation of Online Games Act,2022 made playing or offering games like poker or rummy for money into punishable offences. On a challenge from several gaming companies, the Madras High Court held that the Act would not be applicable to games like rummy and poker, which are games of skill and will be applicable only against games of chance. However, the court held that the State can regulate online rummy and poker by imposing conditions on age of player, timing and others.

The gaming companies, which offer online platforms to play rummy, cannot be held as running gambling as they pay GST to the government and collect only 16% of the stakes as charges for providing the platform.

2. Supreme Court’s decision on Karnataka High Court judgement which held that online rummy games aren’t taxable as gambling and betting – The GST Department sent a show cause notice demanding approximately Rs 21000 crore from the online platform ‘Gameskraft’ holding that rummy is a game of skill. This show cause notice was quashed by the Karnataka High Court and later on an appeal to the Supreme Court the judgement of Karnataka HC was stayed.

3. Supreme Court’s verdict on rummy as a game of skill:

In the case of State of Andhra Pradesh v K. Satyanarayana & Ors. and State of Bombay v R.M.D. Chamarbaugwala, the SC specifically tested the game of rummy based on the principle of skill versus chance and held that rummy is a game of skill, unlike three-card games such as “Teen Patti Flush”, which is a game of chance. It ruled that rummy is a game of skill as it requires a certain amount of skill particularly in memorizing the sequence of falling cards and strategically holding or discarding cards to build a strong hand.

4. Madras High Court judgement on games like chess and carrom when money is involved: In 2005, the Madras High Court, in the case of Manakadu Elainger Nala Sports, Narpani Mandram v State of Tamil Nadu, ruled that games such as chess and carom, even when involving payment of club fees, that is payment of consideration, did not amount to gambling as the games were predominantly games of skill rather than chance.

Introduction of Central Rules for Real Money Games

The Ministry of Electronics and Information Technology (“MeitY”) has introduced regulations primarily for online real money games, effective April 6, 2023.Some of the key features of the amendment are as follows:

1. Permissible Games

The Amendments specify certain online games as permissible. A permissible online game is defined to mean (1) a permissible online real money game or (2) any other online game that is not an online real money game. Specific regulations are provided for permissible online real money games. For other online games there are no specific regulations but MeitY has the power to apply certain obligations under the IT Rules to other online games as well, if it believes it is necessary to do so on certain grounds.

A permissible online real money gameneeds to satisfy two criteria:

· It needs to be an online real money game that is online game where the user makes a deposit in cash or kind with the expectation of earning winnings on that deposit. Winnings is defined in relation to cash or kind. Thus, games where there are no deposits and winnings do not fall in this category.

· Such online real money games need to be verified by an online self-regulatory gaming body.

2. Power to notify apply certain obligations to online games

The MeitY has the power to extend the following obligations as applicable to PORMG to other online games as well, in the interest of the sovereignty and integrity of India or security of the State, friendly relations with foreign States, public order, or preventing user harm.

a) It may direct an Online Gaming Intermediary in respect of such online game to observe obligations under certain clauses as if it is a PORMG, with the necessary changes.

b) It may specify the period within which the OGI must observe the obligations referred to in point (a) above.

3. Verification of Users

OGIs are required to identify users and verify their identities before accepting any deposit in cash or kind from any user for a PORMG. The proviso to the rule prescribes that the procedure to carry out such identification and verification shall be through Know Your Customer (KYC).

a) Trigger for KYC – The KYC process is carried out when the user makes the first deposit with the intermediary. This allows the users to avail the free to play games and perform the KYC only when playing real money online games.

b) Threshold for carrying out KYC - The KYC Master Directions prescribe onerous customer identification, due diligence and monitoring procedures for ‘regulated entities’, which are banks, financial institutes, NBFCs, PSPs, etc. However, OGIs do not operate in the same manner as such regulated entities. They simply provide wallet functionality for users to make deposits and earn winnings.

4. Grievance Redressal Mechanism of OGI

OGIs are required to appoint a grievance officer who must be resident in India.The OGI is required to prominently publish the name of the grievance officer (GO) and their contact details, as well as the mechanism to make a complaint in relation to certain specified obligations, in a clearly visible manner on their home page, home screen, or web page or app screen directly accessible from the home page/home screen.

a) Nature of grievances- Users may make grievances about the following matters:

· Non-compliance by the intermediary to appoint a GO;

· The requirement for OGIs to include specific information in their terms and conditions;

· The requirement for OGIs to identify users and verify identity prior to acceptance of deposits;

· Financing provided by the OGI, or enabling of financing by third parties of OGIs to play online games, in violation of the prohibition in this respect;

· Any other grievance related to the computer resource made available by the OGI.

The GO must also receive and acknowledge any order, notice, or direction issued by Government bodies and courts.

b) Timeline for grievances - The GO must acknowledge a complaint within 24 hours and resolve it within 15 days from the date of its receipt.

c) Appeals from Grievance Officer - Persons aggrieved by the decisions of the GOs of the OGI, or whose grievances are not resolved within the timeline specified, may appeal to a Grievance Appellate Committee (GAC) established by the Central Government, within 30 days from date of receipt of communication from the GO.

Currently, three GACs have been established by the Central Government. GACs are required to deal with appeals expeditiously and endeavor to resolve appeals finally within 30 calendar days from the date of receipt of the appeal. OGIs and Self-Regulatory Bodies are required to comply with the orders of the GAC and upload a report to that effect on their websites.

Appeals from decisions of the GO of the OGI are directly heard by the GAC, instead of by the SRB at the first instance. The Proposed Amendments had required SRBs to hear appeals against decisions of the GO of their OGI members.

The hearing of appeals by the GAC directly may result in lengthier grievance redressal resolution for users, as the GAC also hears appeals from the GO of the SRB, as well as grievances against intermediaries’ GO. In addition, there is no strict time period for grievance redressal by the GAC.

5. Prohibition on providing Financing and enabling Third-Party Financing

OGIs are prohibited from financing through credit, or enabling financing to be offered by a third party, for playing online games. It appears this prohibition has been introduced to curb users taking loans and financially overextending themselves while playing online games.

6. Designation of self-regulatory bodies

The MeitY is empowered to designate as many SRBs as it may consider necessary for the purpose of verifying online games as PORMG under the IT Rules as also discharge functions such as grievance redressal for members, ensuring reporting by members, maintaining a list of verified PORMG and members list.

MeitY may, for reasons to be recorded in writing, suspend or revoke the designation of the SRB after providing it with an opportunity of being heard. However, in such case, MeitY is also empowered to give any interim directions it believes necessary at the same time or at any subsequent time, to an intermediary, or a class of intermediaries, in respect of online games verified by SRB, in the interest of the users of any online game.

The entity must also have sufficient capacity, including financial capacity, to perform its functions as an SRB under the IT Rules.

· Members representative of online gaming industry. - The SRBs are required to have members representative of the gaming industry.Separately, ‘representative of the gaming industry’ could relate to either the number of OGIs or OGIs representing a variety of games.

· SRBs operating at arm’s length from members - One of the key concerns raised by the operators during the stakeholder consultations following the release of the Proposed Amendments was the SRBs remain impartial, and not be controlled by other industry players. Operators highlighted concerns with submitting confidential game formats to SRBs for verification, which may be controlled by competitors.

7. Timeline for compliance

Online Gaming Intermediaries are not required to comply with the obligations under the IT Rules until the expiry of three months from the date on which at least three SRBs have been designed by MeitY.

8. Verification of online games: suspension/revocation of verification

On application being made by OGIs, the registered SRBs are required to verify online real money games as PORMG after being satisfied that:

a) The online real money game does not involve wagering on any outcomeand

b) The OGI and the online game are in compliance with (1) the obligations under Rule 3 and Rule 4, (2) provisions of law relating to minors’ competency to contract, and (3) framework of the SRB.

The SRBs are vested with the discretion to allow release of online real money games immediately for a period of three months based on initial information furnished by applicants, pending a more detailed inquiry.After completion of the inquiry during the 3-month period, the SRB will either declare the online real money game as a PORMG, or inform the applicant with reasons in writing that the online games do not meet the criteria under the IT Rules.

SRBs may also, for reasons communicated in writing, suspend or revoke verification, if satisfied that the online real money games are not in compliance with the IT Rules.

a) Criteria for verification of online real money games

· Wagering on outcomes of games - One of the criteria for verification of online real money games is that such game does not involve wagering on any outcome. This expression is not further defined. Accordingly, it can be argued that the above criteria must be read to mean staking money on uncertain events only. Else, certain games recognized as games of skill by Indian courts could arguably involve wagering on outcomes.

For instance: Fantasy sport games: Such games require users to create fantasy teams comprising of real-world athletes. Users win points based on the actual performance of the real-world athletes in their fantasy teams in sporting events. Users having teams with the highest points are awarded real-money winnings. It can be argued that such fantasy games involve the wagering on outcomes, i.e., the athletes’ performances in matches. Such formats of fantasy sports have been held to be games of skill by High Courts.

· Online games in compliance with Rule 3 - Online games are required to be in compliance with the obligations under Rule 3. Rule 3(1) requires that online games do not ‘violate any law for the time being in force.’ This must be read to include State laws that prohibit betting/wagering on games of chance. Accordingly, OGIs will not register games of chance.

9. Furnishing of information to MeitY by SRB and their other obligations:

The MeitY may require an SRB to furnish information to the MeitY or disclose information on the SRBs’ website/mobile application, or both.

The Amendments require SRBs to publish and maintain on its website, mobile application or both:

a) an updated list of all permissible real money games;

b) details of all such online games including the details of applicant, the dates and period of validity of the verification;

c) the reasons of verification of such online games;

d) the details of suspension or revocation, if any, of verification of any online real money game;

e) an updated list of all its present and former members;

f) the dates of their acceptance as member;

g) their corporate or business-related identity number;

h) other details of suspension or revocation of membership of any member.

Taxation Laws on Gaming Platforms

The most recent decision of the GST Council was the imposition of 28 percent GST on full value of bets placed in online gaming regardless of whether it involves game of chance or game of skill. Under the previous tax system, only 18 percent GST was levied and that too on the platform fee charged for games of skill.

1. Tax on winnings from online games: Presently, online gaming organizations charge 30% TDS on any winnings drawn by a user above Rs. 10000 per transaction. The threshold of Rs. 10000 is still in place as of 1st April 2023, but now the taxation will depend on the annual income of the game user.

As per Finance Bill 2023, Sections 115BBJ and 194BA have been introduced to tax the user’s winnings on different gaming platforms.

· Under Section 115 BBJ, income tax would be charged on net winnings for the previous fiscal year at a rate of 30%.

· Section 194BA mainly deals with TDS applicable on net winnings in the user’s gaming account at the end of the fiscal year. So, your net winnings from online gaming platforms at the end of a fiscal year would be taxed at 30%

· The introduction of these sections suggests that in the coming days, the TDS might be applicable on winnings below Rs.10000 also.

The tax rules apply to all kinds of online games involving skill or chance. Even if the winnings are in the form of coins, coupons, vouchers, or merchandise, they are taxable as per their market value that is, online gamers should be aware of the tax implications of their winnings and comply with the law to avoid any penalties or disputes.

Any real money receives as a joining or referral bonus is not taxable under the mentioned sections. It is taxable on a net basis as per the slab rate applicable for individuals. No tax will be payable if the earned income is below the maximum chargeable tax amount.

2. Proposed tax provisions on winnings:

· The minimum threshold of Rs 10000 will be removed and tax will be applicable on all the winnings.

· Currently the TDS is applicable during the payment of winnings, further it is proposed to be collected annually at the end of FY.

· Now it is the responsibility of the payer to ensure the payment of taxes before releasing the winnings. However, it been discussed to transfer this responsibility on the online gaming platform.

· Currently there is no guidance regarding taxation of gross winnings in relation to net winnings. In future, income tax and TDS shall be computed on net winnings.

However, on the question regarding the cost of playing games be claimed as deduction, Section 58(4) of IT Act provides that no deduction is allowed for any expenditure or allowance related to such income arising from lotteries, crossword puzzles, card games, races and other games of any kind or gambling or betting of any nature.

Exchange control requirements for betting and gambling in India – FEMA requirements.

Indian foreign exchange laws prohibit foreign currency transactions pertaining to betting and gambling. Foreign exchange laws are under the ambit of union government and the restriction is therefore common across the country irrespective of whether a state permits betting and gambling or not. Even if a gaming activity qualifies as betting and gambling, foreign direct investment is not permitted in such entity.

Foreign Exchange requirements -Indian foreign exchange laws require companies to report of any foreign investment within a specified time frame. The Reserve Bank of India (RBI) has, in some instances, while scrutinizing these investment reporting has raised questions to gaming companies regarding the permissibility of foreign investment. One such reported incident is related to PlayGames24x7.

Games24x7 had issued certain equity shares to foreign investors for the period 23rd June, 2006 to 1st February, 2012 but failed to file necessary reports within 30 days as required by foreign exchange regulations. To settle and compound the necessary procedural lapses, PlayGames had filed a compounding application with the RBI. The Reserve Bank, however, asked the company to seek clarification from the Department for Promotion of Industry and Internal Trade (DPIIT) and Ministry of Commerce & Industry regarding the legality of their activity and despite writing to DPIIT multiple times, Play Games claimed that it did not receive any response.

While there remains some level of ambiguity and risk regarding online real money gaming, no action has been taken by RBI on this.Noting previous judgments of Supreme Court, the Bombay High Court on plea by PlayGames directed the RBI to process the application as the games offered by PlayGames do not qualify as gambling. Online gaming entities that do not qualify as gambling businesses have received foreign investment in billions of dollars in the country.

FEMA requirements for betting and gambling – The restrictions under foreign exchange laws are also applicable to outbound investment. In August 2022, the Central Government has come up with a new overseas direct investment (ODI) regime pursuant to which Indians are prohibited from investing in gambling ventures in foreign jurisdictions. The prohibition is also applicable to transactions related to betting and gambling by individuals.

The use of international credit and debit cards – While there is no monetary ceiling prescribed for use of international credit cards through the internet, such cards cannot be used on the internet or otherwise for the purchase of prohibited items like lottery tickets, banned magazines, participation in sweepstakes, football pool, etc.On the other hand, international debit cards can be used only for permissible current account transactions subject to the limits mentioned in the schedules of the Current Account Rules. The Master Directions further prohibits the use of international debit cards, in any manner, for the purchase of prohibited items such as lottery tickets, participation in sweepstakes, football pool, etc.

How to establish an Online Gaming Company

The first and foremost thing in starting an online gaming company is to have a product ready, which will be the game you are offering to the public. The idea for the game creation demands you to consider every area of gaming, including who will be your game's target audience, the platform on which the game will be played, how much money will be spent on marketing the game, and the potential revenue this game can bring in.

Registration Procedure - The following business structures are available in India under which you can register an online gaming entity.

· Proprietorship Firm

· Partnership Firm

· Limited Liability Partnership (LLP)

· Private Limited Company

· Public Limited Company

Further in this article we will be discussing on the private limited company and the LLP as they are the two most common business structures suggested.

Incorporation of an online gaming company as a private limited company – Currently, in order to register an online gaming business as a private limited company, at least two shareholders and two directors are required. It is also possible to create a private limited company as a single person; however, it is required for a single person to serve as the nominee.

Requirements to register an online gaming business as a private limited company:

· At least two members

· At least two shareholders

· The company's name

· Location of the Company

· Equity Capital (there is no minimum capital requirement)

· Each shareholder must subscribe for a share at the moment of incorporation.

· Email from the Company

· Directors' email addresses

· Number of Directors' Cell Phones

· The primary goal of the company

· PAN and Aadhar of Subscribers or Directors

· Bank records for Subscribers (Latest with Name and Address)

· Address of the company's registered office or mailing address

· All the paperwork and data needed to register an online gambling business.

Draft Main Objects of the Online Gaming Company:

· To conduct "games of skill," which include all such games where there is a preponderance of skill over chance. This includes situations where skill relates to strategically placing wagers or bets, choosing teams or virtual stocks based on analyses, or situations where skill relates to the way moves are made, whether through the use of physical or mental skill and acumen.

· To run skill game programs like chess, sudoku, poker, rummy, quizzes, bridge, nap, spades, solitaire, virtual golf, virtual racing games like horse racing and car racing, etc.; virtual sports like soccer, cricket, archery, snooker, bridge, and pool; virtual fighting, wrestling, and boxing; virtual combat games; virtual adventure games; virtual mystery and detective games; and virtual golf.

· Offering "games of skill" via a website, mobile platform, television, or another online medium in addition to generating income by advertising, taking a cut of game winnings, or imposing a set price for joining or downloading a game.

· To operate a business that involves buying, selling, reselling, importing, exporting, transporting, storing, creating, promoting, marketing, or providing, trading, or otherwise dealing in any way with any form of game-related items in India or elsewhere.

Mandatory Registrations to be done:

· Trademark Registration

Trademark serves as a symbol for your company’s name, logo, and individuality.Furthermore, trademark registration protects your game’s title and logo against unauthorized cloning.

· Copyright Registration

Copyright is a safeguard for your games, ensuring that they cannot be stolen or copied by others. A copyright registration restricts the rights of anybody else to use your idea without your permission.

· GST Registration

A company registration can be done at the time of incorporation, it is recommended to first open a bank account for the business, deposit some money into it, and then apply for a separate GST registration as needed. If your revenue is less than the threshold of 20 lakh rupees, you do not need to apply. However, if you want to get a GST number, you can do so. Doing so will also enable you to claim an input tax credit on the GST you paid if you are purchasing and paying for marketing, advertising, etc., or paying for expenses related to the development of an app, or any other expenses, such as those pertaining to the development of the app.

Challenges faced by Gaming Platforms in India

The online gaming industry continues to be a dynamic and high growth sector in India, bolstered by developments such as digital payment solutions, analytics, and enhanced IT infrastructure and hardware. However, the recent regulatory changes brought in has introduced uncertainty and challenges for gaming companies.

1. Hike in GST - One of the challenges faced by these companies is the GST rate of 28% on online money gaming. The industry argues that for games classified as “Games of skill,” the tax rate should be 18% on revenue. However, the government maintains that GST should be payable at 28% on the bet value. As a result, the government has proposed levying GST at 28% on all online money gaming, regardless of whether it is a skill-based or chance-based game.

2. Obtain GST Registration -Another challenge is the requirement for online gaming companies located outside India to obtain GST registration and comply with GST provisions. These companies must maintain records of transactions with Indian customers and file timely reports with tax authorities.

3. Valuation for the imposition of GST - The government proposes that the valuation of online money gaming should be based on the amount paid or deposited by the player, excluding amounts from previous winnings. This requires a change in the technology framework to generate the necessary reports.

4. User Data Privacy - Online gaming platforms collect vast amounts of user data and often involve user-generated content. Allocating the value of data and user-generated content among different entities within the company can be difficult, especially with the recent approval of the Digital Personal Data Protection Bill, 2023.

5. Challenges regarding IPR of Intangible Assets - Registration of software patents are not permitted in India, except when they are a component of a hardware and are embedded inside. Entities that innovate with standalone digital solutions for a variety of uses are disadvantaged due to this legal position.General Counsels operating in this sector need to ensure that the software code by itself is protected under the currently available protections in law such as copyright protection.

6. Lack of Clarity in the KYC process -For small companies, particularly startups, the lack of clarity in KYC requirements poses a significant challenge. These companies may lack the necessary time and resources to conduct extensive research and develop effective KYC processes that both comply with regulatory requirements and providea seamless user experience. Another concern related to the lack of clarity is the specific Officially Valid Documents (OVDs) required for KYC verification. While the Play Store mandates Aadhar verification, customers who don’t possess an Aadhaar card handy but have alternative OVDs such as driver’s licenses or voter IDs may face difficulties during onboarding.

The KYC process has a significant impact on customer drop-offs, particularly during peak seasons like the Indian Premier League (IPL) and World Cup when online gaming platforms experience a substantial inflow of users. However, slow response times and technical glitches during the KYC process can hinder scalability and result in a poor user experience.

7. Escalating Threat of Fraud - The rise in fraud is a significant concern in the gaming industry, prompting the government to introduce regulations aimed at combating identity theft and account takeover. However, it is essential to strike a balance between fraud prevention and customer convenience, as overly strict processes may result in customer drop-offs.

Frauds in the gaming industry encompass a range of activities, including high-tech schemes like identity theft and account takeover, as well as more traditional forms of fraud such as multi-accounting, chip dumping, and collusion.

Given the complexity and scale of the issue, manual fraud prevention is nearly impossible. Therefore, investing in AI/ML (Artificial Intelligence/Machine Learning) solutions with high accuracy becomes essential to effectively curb fraud in the industry.

Other challenges include revenue allocation, risk and R&D expenses, royalties and licensing, emerging regulatory challenges, differing tax jurisdictions, TDS on winnings from online games, and documentation requirements.

Recent Online Gaming Scams

1. Dani Data AppScam - The Gujarat Policereportedly unearthed a major online gaming scam in which a Chinese national duped 1,200 people of nearly INR 1,400 Cr in a span of mere nine days. After the users deposited the money, the app became non-functional after the nine-day period, and the depositors were unable to access their funds.

The accused set upshell companies to channel the money of users overseas through hawala networks. By the time the Gujarat Police filed an FIR against the Chinese national, he fled the country to China.

2. Nagpur businessman duped of ₹58 crore in online gaming scam - A businessman from Nagpur lost a staggering ₹58 crore in online gambling and the investigation led to the recovery of ₹17 crore in cash besides 14 kg of gold from the house of the person who allegedly duped him. the alleged `bookie' who had created the online gaming platform, is suspected to have fled to Dubai a day before the raid at his residence. The complainant was convinced to explore online gambling as a lucrative avenue of earning money and initially transferred 8 lakh rupees to the platform through a hawala network. After initial success, the businessman's fortunes took a drastic downturn as he lost a whopping ₹58 crore while winning only around Rs. 5 crores.

3. Rs 4000 crore online gaming scam, raids conducted in many states - In a massive crackdown on online gaming apps, the Enforcement Directorate (ED) has carried out search and seizure at as many as 25 locations in five states under the Foreign Exchange Management Act. In a massive crackdown on online gaming apps, the Enforcement Directorate (ED) has carried out search and seizure at as many as 25 locations in five states under the Foreign Exchange Management Act. These online gaming companies and websites are registered in small island countries like Curacao, Malta and Cyprus. However, all of them are linked to Indian bank accounts opened in the name of proxy persons who have no links with online gaming activity.The amount so collected from the general public through gaming websites is then allegedly routed through multiple bank accounts and finally remitted out of India by mis-declaring the purpose of remittances against the import of services and goods.

4. Mahadev Book App Scam- The Gautam Buddha Nagar police raided a building and arrested 16 people Tuesday in connection with an online gaming fraud operated from Dubai which is believed to have spread to different parts of India. The fraud was being committed through Mahadeva App, which is available on Google Play Store and social media platforms. First, they used to get their apps downloaded (on the users’ phones), then offered small deals, like a return of Rs 600 for Rs 500 etc. In this way, they successfully got the victims to bet larger amounts in lakhs of rupees.

The accused used around 15-16 saving bank accounts and 12-14 current accounts. They used to ask for money in their savings account, transfer it to the current account and then siphon it off. In the last two months, Rs 405 crore was transferred from 26 fake accounts in 10 banks to other bank accounts. The police said this gaming scam is active in 11 other countries, like Pakistan, Nepal, Bangladesh and Sri Lanka.