Online games involving real money linked to terror financing, Centre tells SC
The Union government on Tuesday told the Supreme Court that unregulated real-money online gaming has demonstrable links to terror financing and money laundering
The Union government on Tuesday told the Supreme Court that unregulated real-money online gaming has demonstrable links to terror financing and money laundering, offering to share classified material showing the specific nature of these connections as it mounted a vigorous defence of Parliament’s decision to ban such games entirely.
In a detailed affidavit responding to transfer petitions filed by gaming companies, including Head Digital Works Pvt Ltd, the Centre described the online real-money gaming ecosystem as a “menace” that has enabled systematic criminal activity involving tax evasion, mule accounts, crypto-routed fund diversion, hawala operations and offshore shell entities.
“There is enough material and data that indicates that the unregulated online gaming sector have links with terror financing and money laundering,” the affidavit stated. “Should this Hon’ble Court direct, the respondent is also willing to place the data pertaining to money laundering and terror financing links to online money games in a sealed cover for the perusal of this Hon’ble Court.”
The government cited inputs verified across multiple ministries and enforcement agencies, including analyses of Suspicious Transaction Reports (STR) and Cross Border Wire Transfer Reports. It said online gaming platforms present high-risk channels for laundering proceeds from drug trafficking, fraud, human trafficking and weapons smuggling.
Investigations revealed the use of front persons such as students, homemakers and retired individuals whose bank accounts serve as identity shields for criminal organisations, the affidavit said. It noted widespread recruitment of money mules through social media and messaging apps.
The Centre highlighted a “dramatic and exponential escalation” in suspicious gaming-related transactions, from one STR enquiry in 2019-20 to 239 in 2023-24, involving 7,056 accounts and reflecting 20-fold increases in both credits and debits. Outward remittances through real-money gaming channels exceeded ₹5,700 crore in FY 2023-24, with multiple Indian entities sending large sums to foreign jurisdictions known for weak financial oversight.
“In several years, outward remittances significantly exceeded inward remittances, indicating dominant capital flight rather than foreign investment or winnings coming into India,” it contended. “These movement patterns raise concerns of mis-declared remittances, layering through foreign entities, and movement of user deposits out of India under misleading descriptions.”
The affidavit argued that the real-money gaming ecosystem has severely harmed public health, caused widespread addiction, pushed vulnerable young people into debt traps and driven dozens to suicide. “There can be no right to profession or trade at the cost of human lives which online money gaming is known to take, month after month, across the country,” it stated.
Citing state-verified data, the government noted 32 suicide cases in Karnataka between January 2023 and July 2025, 20 cases in Telangana last year alone including seven deaths in one month recently, and over 30 suicides in Tamil Nadu in recent years that prompted the Justice Chandru Committee’s recommendations and subsequent state legislation.
The government estimated that ₹20,000 crore is lost annually by users to real-money gaming companies and that approximately 45 crore Indians have been affected by such online games.
Invoking Entries 31 and 97 of List I of the Constitution, the Union asserted that regulation of the digital sphere, including online gaming, falls squarely within Parliament’s domain. It warned that state-wise attempts to regulate the sector had produced “regulatory chaos”, with conflicting approaches leading to raids, FIRs and litigation across jurisdictions. The 2023 IT Gaming Rules were enacted precisely to avoid such overlap, it said.
The affidavit criticised gaming companies for “blowing hot and cold” by arguing before high courts that only the Centre could regulate online money games, but before the Supreme Court that the Union lacked competence as well. “It appears that the online money gaming platforms neither wish to be regulated by the states nor by the Union,” it added.
Rejecting the industry’s reliance on Article 19(1)(g), which guarantees the right to practise any profession or carry on any occupation, trade or business, the Centre argued that offering real-money gaming platforms is “res extra commercium” — outside the scope of constitutionally protected trade. Even otherwise, it said, reasonable restrictions may include prohibition, particularly when national security, public order and public health are directly threatened.
“There can be no right to trade at the cost of human lives,” the Centre said, adding that the industry’s claim of job losses and investment impact cannot outweigh the grave societal harm posed by online money gaming.
On the companies’ assertion about depriving the rights of consumers, the Centre maintained: “It is quite shocking that the Petitioner has contended that the impugned Act violates the rights under Article 21 of all its end consumers i.e. the players. In a welfare state, the Union Government has an obligation to serve the larger public interest and when the very lives of the end consumers are at stake and is widely reported to have been subject matters of several hundreds of suicides, the only reasonable measure is a complete prohibition of offering and facilitating of online money games.”
Clarifying that the law does not ban all online gaming, the Centre said the prohibition is limited to online money games. E-sports and other non-money online games remain fully permitted. “All that the Petitioner has to do is to realign its business model” to conform to the statutory definition of permissible online games, it added.
A bench led by justice JB Pardiwala had in September transferred all similar cases from various high courts to the Supreme Court. The government’s affidavit sets the stage for a constitutional battle over competence, federalism, digital regulation and the future of India’s online gaming industry.
