As online gaming booms, India’s new law draws the line between innovation and exploitation, targeting crime, radicalisation, and fraud.
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In August 2025, the Government of India passed the Promotion and Regulation of Online Gaming Act 2025 to regulate online gaming more effectively, particularly with reference to issues of security, financial integrity, and consumer protection. The Act proposes to ban Real Money Games (RMG) and promote and regulate the online gaming sector, including e-sports, educational games, and social gaming.
The rationale behind the Act is to control the diverse gaming industry and protect the citizens from several financial and health implications, such as loss of money in betting, addictive algorithms, as well as platforms where terrorist organisations recruit, radicalise, coordinate, and communicate their group activities.
The Act proposes to ban Real Money Games (RMG) and promote and regulate the online gaming sector, including e-sports, educational games, and social gaming.
This analysis examines the intersection between India’s online gaming sector and national security challenges, drawing upon recent cases, empirical data, and enforcement records. The new Act argues that regulation is not only a necessary corrective but also a step towards formalising a sector whose unchecked expansion carries profound risks. The discussion illustrates how the Act represents a critical intervention to balance economic opportunity with national security imperatives.
The diversity of users is equally notable. Platforms attract urban millennials, students, gig economy workers, and increasingly, semi-urban youth with affordable internet access. The monetisation of gaming through real-money platforms, in-game purchases, and digital wallets has generated sizeable financial flows, estimated at INR 31,000 crore as of 2025. However, such growth has created opportunities for exploitation by criminal networks and extremist groups.
The online gaming industry in India has witnessed unprecedented growth over the past decade, transforming from a marginal to a multi-action-rupee ecosystem with millions of users. Given the push in the tech and innovation industries, as well as the creation and engagement of Internet Protocol (IP), it is expected that the gaming industry will grow to a projected market size of US$9 billion and is expected to drive investor value by US$63 billion by 2029.
The monetisation of gaming through real-money platforms, in-game purchases, and digital wallets has generated sizeable financial flows, estimated at INR 31,000 crore as of 2025.
According to a report, India currently houses around 591 million gamers, which is nearly 20 percent of the global gamer population. The number of game downloads in India increased from 5.65 billion in 2019 to 9.5 billion in 2023, capturing 16 percent of global game downloads. The mobile gaming sector dominates the market, contributing to 90 percent of the total gaming market in India, driven by rapid technological advancements and expanding demand for gaming.
Image 1: Number of Gamers in India Prediction until 2028.
Source: India Brand Equity Foundation (IBEF) Blog
This expansion has been augmented by internet penetration from towns to metropolitan cities, the availability of affordable smartphones, and a young demographic with a preference for digital entertainment. However, alongside this growth, concerns have deepened about the misuse of gaming platforms for illicit purposes, ranging from money laundering and tax evasion to radicalisation and terror financing.
The economic and security costs of leaving the sector unregulated are equally stark. Estimates suggest that India lost over INR25,000 crore between 2022 and 2024 due to scams, laundering, and related tax evasion through gaming platforms. These losses represent not only monetary leakage but also damage to consumer trust, investor confidence, and India’s global reputation as a digital economy.
The most pressing concern is the use of gaming platforms as conduits for money laundering. The Mahadev App case has been symbolic in this regard. The Enforcement Directorate uncovered a laundering network of over INR6,000 crore linked to the app, involving hawala operators, benami accounts, and cross-border financial flows. The Hyderabad Chinese app scam revealed another dimension, with nearly INR903 crore siphoned off in 2022–23 through fraudulent loan and gaming applications with links to China. Similarly, the E-Nuggets scam in Kolkata demonstrated how seemingly innocuous gaming apps were used to dupe investors, resulting in over INR90 crore in losses.
Estimates suggest that India lost over INR25,000 crore between 2022 and 2024 due to scams, laundering, and related tax evasion through gaming platforms.
Empirical records underline the systemic scale of the problem. The Financial Intelligence Unit–India (FIU-IND) traced INR4,000 crore in suspicious gaming-related transactions in 2023; while recurring consumer losses and tax leakages are estimated to cost the exchequer and citizens INR20,000 crore per annum through online real-money gaming. This steady leakage of money through illicit gaming operations not only weakens financial stability but also creates avenues for grey money to enter legitimate markets.
The Act directly addresses these vulnerabilities by placing gaming companies under a clearer compliance regime. By mandating registration, financial audits, and alignment with anti-money laundering (AML) standards, the law seeks to close loopholes that previously allowed digital platforms to operate with limited scrutiny. This approach is consistent with international practice, where jurisdictions such as the European Union (EU) and Singapore have strengthened financial surveillance of online gaming to pre-empt its abuse by criminal syndicates.
Beyond financial misuse, online gaming platforms have increasingly drawn scrutiny for their potential role in facilitating radicalisation. While the number of confirmed cases remains limited, the trend is disquieting. Intelligence agencies suspect that extremists could use the chatrooms for recruitment or ideological grooming, similar to what has been observed in Kashmir, where PUBG is being used for communication. These platforms—often equipped with chat rooms, multiplayer voice communication, and anonymous digital identities—provide fertile ground for radical elements to connect with an impressionable youth. In India’s case, the demographic profile of young, digitally active users makes gaming platforms a natural target for extremist narratives.
Likewise, laundering and radicalisation are issues of terror financing. While the scale is smaller compared to narcotics or traditional hawala networks, evidence points to the rising use of gaming platforms to move funds for extremist groups. Reports from law enforcement agencies estimate that a large sum of money has been lost in scams through gaming-related payment systems to finance extremist activity. By necessitating Know Your Customer (KYC) compliance for users, tightening the control of digital wallets, and mandating reporting of suspicious transactions, the Act aims to cut off and minimise the avenues of financial misuse.
These platforms—often equipped with chat rooms, multiplayer voice communication, and anonymous digital identities—provide fertile ground for radical elements to connect with an impressionable youth.
The Act’s features, including mandatory monitoring of content, traceability of in-game communication, and stricter data-sharing requirements with law enforcement, offer a necessary safeguard. Although such measures raise concerns about privacy and surveillance, prioritising national security cannot be dismissed. However, it is essential to have a balance between protecting freedoms and preventing extremist misuse.
Against this backdrop, the Act represents a necessary and timely intervention. Its provisions are not merely reactive; they chart a forward-looking agenda that integrates security with economic governance.
The Indian Act attempts to strike this balance by emphasising compliance without shutting the door on innovation.
Critics may argue that excessive regulation could stifle innovation or drive users to unregulated offshore platforms. These are legitimate concerns, but they must be weighed against the demonstrable risks. The Indian Act attempts to strike this balance by emphasising compliance without shutting the door on innovation. By nurturing a trusted environment, regulation is expected to accelerate the sector’s growth by attracting responsible investment and reassuring users.
The online gaming sector embodies both the promise and peril of India’s digital age. Its rapid expansion has created economic opportunities, cultural shifts, and new forms of entertainment. Nevertheless, the very features that make gaming attractive—its scale, accessibility, and financial integration—also make it vulnerable to manipulation by criminal and extremist actors. The misuse of gaming platforms for laundering, radicalisation, and terror financing has already been documented.
The Act is therefore not merely a policy choice but a national necessity. Far from being restrictive, such regulation holds the potential to strengthen India’s digital economy, enhance user trust, and align the country with global best practices.
Although the anxieties regarding thousands of people losing their jobs are valid, these risks can be addressed if gaming companies proactively participate with the government.
Although the anxieties regarding thousands of people losing their jobs are valid, these risks can be addressed if gaming companies proactively participate with the government. Instead of viewing regulation as a limitation, app developers and platforms could seek assistance through incubation schemes, skill development programmes, or transitional tax relief to cushion the short-term disruptions.
The Act reflects a recognition that digital transformation cannot proceed without security, and that security itself must be adaptive to the evolving technological landscape. The regulation of online gaming, then, is not about limiting freedom but about enabling safe innovation, which is an imperative for a country navigating the complexities of digital and cyber security.
Soumya Awasthi is a Fellow at the Centre for Security, Strategy and Technology, Observer Research Foundation.
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Dr Soumya Awasthi is a Fellow, Centre for Security, Strategy and Technology at the Observer Research Foundation. Her work focuses on the intersection of technology and ...
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