Online Gaming Ecosystem Tied to Drugs, Hawala and Terror Financing: Centre Tells Supreme Court

The submission came in a detailed affidavit responding to constitutional challenges to the Promotion and Regulation of Online Gaming Act, 2025, filed by major industry players including Head Digital Works Pvt Ltd.

The Centre warned that the unchecked growth of online money gaming posed a “clear threat to national security, public order and financial sovereignty,” citing inputs from multiple ministries and enforcement agencies.

It said it was prepared to place “classified material” before the Court in a sealed cover to demonstrate demonstrable links between gaming networks and drug trafficking, human trafficking, оружие smuggling and other organised criminal activity.

According to the affidavit filed through AoR Sudarshan Lamba, suspicious transaction reports associated with gaming platforms have risen exponentially. From a single enquiry in 2019-20, the number surged to over 200 in 2023-24, involving nearly 7,000 bank accounts and outward remittances exceeding Rs 5,700 crore routed to jurisdictions with weak financial oversight.

The government alleged extensive use of mule accounts, crypto-layering, hawala channels and offshore shell entities to mask illicit flows.

The Centre also foregrounded the public health and social harms associated with real-money gaming. Data submitted by states recorded 32 suicides in Karnataka between January 2023 and July 2025, 20 cases in Telangana last year, and over 30 in Tamil Nadu in recent years. Nearly 45 crore individuals, the affidavit claimed, had been adversely impacted. “There can be no right to profession or trade at the cost of human lives,” it said, urging the Court to reject the industry’s reliance on Article 19(1)(g).

On legislative competence, the Centre argued that Entries 31 and 97 of List I place regulation of the digital space squarely within Parliament’s domain. It criticised state-level interventions as having created “regulatory chaos,” prompting the enactment of the 2025 legislation to establish uniform standards and close enforcement gaps arising from extra-territoriality and cross-border operations. The prohibition, it clarified, does not extend to e-sports or online games without real-money stakes.

In a separate affidavit before a bench of Justices JB Pardiwala and KV Viswanathan, which has consolidated challenges from multiple High Courts, the Centre reiterated that unregulated gaming platforms were aggressively marketed through celebrity endorsements and influencer campaigns, disproportionately targeting youth and vulnerable groups.

It contended that the new law was enacted in the public interest to curb the “widespread and harmful impact” of these platforms on individuals, families and the country.