Govt slams Gaming corporations in SC over PROGA problem

The Centre has instructed the Supreme Court that the unregulated on-line money-gaming ecosystem poses important dangers to public order, nationwide safety and monetary integrity, arguing that Parliament is totally empowered to enact the Prohibition of Online Gambling and Regulation of Online Games Act (PROGA). The submission is available in response to a writ petition filed by Head Digital Works difficult the constitutional validity of the laws.

In an in depth affidavit (a duplicate of which is with Storyboard18), the federal government mentioned the sector has expanded with none coherent or enabling authorized framework, which has “hindered structured development” and prevented the emergence of accountable gaming norms. According to the affidavit, the vacuum in regulation has enabled widespread entry to on-line cash video games via cellphones and the web, exposing younger and economically weak teams to “serious social, psychological and public health harms.”

The Centre has accused on-line money-gaming firms of “blowing hot and cold” on the query of regulatory oversight, telling the court docket that the identical platforms which earlier insisted solely the Union may legislate on the sector at the moment are difficult Parliament’s competence after the enactment of PROGA.

In its affidavit, the federal government additionally detailed how a number of foreign-controlled gaming operators have been incorporating entities in India utilizing dummy native administrators, who serve merely as a façade earlier than overseas nationals assume management of operations — a sample the Enforcement Directorate says has enabled illicit fund flows, weak compliance constructions and evasion of regulatory scrutiny.

The Centre mentioned many on-line money-gaming platforms use “manipulative design features, addictive algorithms, bots and undisclosed agents,” creating programs that undermine equity and transparency whereas encouraging compulsive use and monetary losses. It added that this ecosystem has been aggressively marketed via large-scale promoting and movie star and influencer endorsements, additional amplifying dangers for minors and different weak classes.

Links to Terror Financing and Money Laundering

The affidavit states that information analysed by investigative companies establishes clear hyperlinks between elements of the net gaming sector and cash laundering, terror financing and fraud. The authorities cited suspicious transaction reviews (STRs) and cross-border wire switch reviews (CBWTRs) to argue that illicit funds are being routed via gaming platforms.

According to the affidavit, gaming firms included in small island jurisdictions have facilitated the motion of funds out of India utilizing proxy financial institution accounts opened within the names of “front persons” — people reminiscent of college students, homemakers and retired individuals whose accounts are used to masks the identification of the actual beneficiaries. Banks have additionally recognized “money mule” accounts the place buyer IDs had been linked to on-line gaming web sites and used to route illicit proceeds.

The authorities mentioned Enforcement Directorate investigations have discovered that dummy Indian administrators are routinely appointed to include gaming corporations, after which overseas nationals journey to India and take cost of operations. Local recruits are then used to open mule accounts and create service provider and commerce accounts with cost intermediaries. Weak due-diligence practices and non-reporting of suspicious transactions by intermediaries have enabled such corporations to maneuver funds with out detection, the affidavit mentioned.

The authorities additionally detailed strategies used for layering unlawful transactions, together with “refer-and-earn” schemes and MLM-style incentives that push customers’ financial institution accounts into the circulate of funds. It highlighted fraud patterns reminiscent of faux gaming web sites promoted on WhatsApp and Telegram that vanish after amassing deposits; apps that set off unauthorised recurring withdrawals after the primary OTP-verified cost; and platforms that provide excessive preliminary rewards to draw deposits earlier than disabling withdrawals and wiping out server information.

These options, together with cross-border constructions and digital anonymity, have made investigations extraordinarily difficult, the federal government mentioned.

Regulatory Turf and Constitutional Competence

The Centre argued that on-line cash gaming falls squarely inside Parliament’s legislative competence below Entry 31 (communications) and Entry 97 (residuary powers) of the Union List. The affidavit mentioned the technological nature, cross-border operations and absence of any specific entry within the State List place the topic throughout the Union’s area. Even if some elements may theoretically be regulated by states, Parliament might legislate below Entry 52 to guard public curiosity, the Centre mentioned.

According to the federal government, permitting states to independently regulate on-line gaming would create “regulatory chaos” and duplicative compliance burdens. Varying state approaches, it mentioned, have already led to raids, FIRs, arrests and authorized uncertainty, together with unconstitutional prohibitions of skill-based video games performed for stakes. Conflicting regimes may exert a chilling impact on operators, staff and the broader tech ecosystem, probably jeopardising jobs of over a lakh expert employees, the affidavit warned.

The authorities mentioned the IT Gaming Rules of 2023 had been framed exactly to keep away from such fragmentation and to determine a uniform federal framework appropriate for a digital-first, borderless trade.

Online Gaming Firms “Blowing Hot and Cold”

The affidavit accuses on-line gaming platforms of adopting contradictory positions relying on comfort. It mentioned that when states enacted legal guidelines to manage the sector, platforms argued that solely the Union had the constitutional authority. Yet, after Parliament legislated, the identical firms — together with the petitioner — now declare that the Union lacks competence.

The Centre instructed the court docket that this sample exhibits the trade “does not want any kind of regulation or oversight,” and that Parliament took this into consideration whereas framing PROGA, which introduces prohibitions geared toward “preventing the erosion of youth, protecting public health, curbing money laundering and blocking terror financing.”

Prohibitions Are Justified and Proportionate, Centre Says

The authorities defended the reasonableness of the regulation, stating that each provision is backed by “rationality” and geared toward containing documented dangers. It argued that actions labeled as res additional commercium — that’s, exterior the scope of reliable commerce — could be completely prohibited by Parliament, and that the petitioner can’t invoke proportionality or least-restrictive-means assessments when no basic rights are implicated.

Overall, the Centre maintained that the “pith and substance” of the Act firmly place it inside Parliament’s unique legislative subject and that the regulation was neither capricious nor extreme however a essential response to a transparent national-level risk.

First Published on Nov 26, 2025 12:31 PM