Are Indian betting payments breaking the law?

Are Indian betting payments breaking the law?

Gambling and betting activities are strictly regulated by law in India. Most forms of online/offline betting are illegal under the Public Gambling Act 1867 and the Information Technology Act, except for a few states (e.g. Goa, Sikkim, etc.) which allow specific forms of legal gambling. Payment platforms providing settlement services for illegal betting may involve money laundering risks and violate the Prevention of Money Laundering Act (PMLA). The Reserve Bank of India (RBI) specifically prohibits financial institutions from processing transactions for unauthorised gambling platforms. It is recommended that local laws be strictly adhered to and avoid participating in or supporting any illegal money flow behaviour. The application of specific laws should be judged in conjunction with the provisions of territorial jurisdiction, and professional legal counsel should be consulted if necessary.

(Note: This response does not constitute legal advice and is for general information only.)

The complex and ever-changing legal landscape of gambling and betting in India is analysed in more detail below:

1. Legal framework

  • Public Gambling Act, 1867.: The Act prohibits the operation of, or participation in, gambling establishments, but states have the right to make their own rules.
  • Information Technology Act (IT Act, 2000): May apply to online gaming platforms, particularly where fraud, money laundering or illicit financial flows are involved.
  • Goods and Services Tax (GST) Amendment Bill: From 2023, India levies a GST of $28% on online betting (including the full amount wagered), signalling the government's stance on tighter regulation.

2. Differences in state laws

  • Few states like Goa, Sikkim allow legal casino and lottery operations(Licence required).
  • Tamil Nadu, Telangana, etc. ban online/offline gambling completely.
  • Impact of the jurisprudence of the Supreme Court(e.g., KR Lakshmanan 1996): "games of skill" (e.g., Fantasy Sports) were held not to fall within the scope of gambling, but pure games of chance were still restricted.

3. Compliance risks of payment platforms

  • RBI asks banks and payment gateways not to process transactions for illegal betting platforms (Notification 2022). Violations may result in account freezing or penalties.
  • NPCI (National Payments Corporation) may restrict the use of channels such as UPI for suspicious betting transactions.
  • FIU-IND (Financial Intelligence Unit) monitors suspicious money flows and violates PMLA with up to 7 years in prison.

4. Recent enforcement cases

  • 2023 Delhi Police seizes multiple illegal betting apps and arrests payment middlemen.
  • The GST department has recovered high taxes from several fantasy sports companies.

⚠️ suggests:

  1. Additional attention to FEMA (Foreign Exchange Management Act) is required if cross-border operations are involved.
  2. Legal opinions should be obtained for "grey area" operations to mitigate risks.
  3. NFT/meta-universe related gaming could face the introduction of new regulations.

For specific operational solutions it is recommended to consult a team of lawyers who are familiar with the federal and local laws of India. (Informal legal advice.)