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India's Gaming Ban Backfires as Bettors Flee to Offshore Apps
When New Delhi outlawed real-money gaming, the official logic was clean and reassuring: switch off the apps, and you switch off the harm. Nearly a year into the experiment, the India gaming ban is producing a far messier result. The licensed studios that once dominated the market have shut their real-money desks — but the players have not stopped playing. They have simply slipped through the regulatory net into a shadow economy of offshore betting apps that Indian authorities can name but cannot easily reach. It is a textbook case of a prohibition that changed where the money flows without changing how much of it flows.
How the Ban Came Into Force
The legal backbone is the Promotion and Regulation of Online Gaming Act, widely shortened to PROGA. Parliament cleared the bill in August 2025, and the implementing rules were notified in April 2026, bringing the framework fully into force from 1 May 2026. The law draws a hard line: games where users deposit money hoping to win cash are prohibited, regardless of whether they are arguably games of skill. A new regulator, the Online Gaming Authority of India, was created to police the space and to certify the kinds of games — casual, educational, esports — that are still allowed.
The immediate effect on the formal industry was brutal. Fantasy-sports giant Dream11, valued in the billions, wound down its cash business after concluding there was no legal route to continue. Mobile Premier League, Games24x7, Zupee, PokerBaazi, GamesKraft, Head Digital Works and rummy operators such as RummyCircle and Adda52 all either pivoted or cut deep. Over a roughly 90-day window, real-money operators reportedly wrote down more than $840 million in assets, and industry bodies warned that close to 200,000 direct and indirect jobs were exposed. A sector that had been one of India's loudest start-up success stories essentially had its core revenue engine removed overnight.
The Offshore Surge Nobody Wanted
Here is where the story turns. A December 2025 survey by CUTS International in the Delhi-NCR region found that participation on unregulated offshore platforms did not collapse after the ban — it climbed. Reported usage rose from about 68% before the ban to roughly 82% afterwards, a relative jump of around 20%. Even more striking, the share of respondents accessing such platforms on a daily basis reportedly leapt from a low single-digit figure to well over 40%. One in four users said they only started using offshore apps after the crackdown began in September 2025.
Spending intensified too. The proportion of offshore users putting ₹5,000 to ₹9,999 a month into these apps rose sharply, and a meaningful slice now reportedly spends above ₹10,000 monthly. In other words, the people most likely to be harmed — the heavy, habitual bettors the law was written to protect — appear to be among those migrating fastest, often into environments with no withdrawal guarantees, no grievance redress and no Indian legal recourse at all.
This is the central irony of the India gaming ban: a policy designed to shrink risk may have concentrated it. Domestic platforms, for all their faults, operated under know-your-customer rules, tax scrutiny and deposit limits. The offshore replacements answer to no one inside India's borders.
Why UPI Became the Weak Link
The plumbing that keeps the shadow market alive is the very payments system India is most proud of. Zerodha co-founder Nithin Kamath publicly flagged the problem in early 2026, warning that offshore money-gaming apps were multiplying and quietly riding on UPI rails. Deposits, he noted, can be made through familiar wallets and apps in seconds, sometimes for sums as small as a few hundred rupees, after which the money is routed to overseas accounts that are nearly impossible to claw back if a user is defrauded.
Kamath's proposed fix was blunt: make the money movement hard. If offshore apps cannot tap UPI and banks actively freeze the mule accounts that service them, the convenience that fuels impulse betting evaporates. It is a recognition that you cannot regulate gambling by blocking websites alone when the financial layer remains frictionless. The apps can spin up a new mirror domain in minutes; rebuilding a payments pipeline is harder.
The Whack-a-Mole Enforcement Problem
The government has not been idle. By late March 2026, authorities reported blocking or actioning more than 8,000 URLs tied to betting and gambling, with thousands of those takedowns coming after PROGA's passage. But URL blocking is a game of attrition. Operators rotate domains, push users toward Telegram channels and app downloads outside official stores, and lean on VPNs and mirror sites to stay one step ahead.
The enforcement gap exposes a structural truth about digital prohibition. A ban on a domestically incorporated company is enforceable — you can raid offices, freeze accounts and prosecute directors. A ban on an entity headquartered in a jurisdiction with loose gambling laws is largely symbolic unless you control the choke points of money and access. India has the first half of that equation and is still building the second.
The Tax Hammer and the Legal Fight
Running parallel to the migration story is an enormous fiscal one. On 27 May 2026, the Supreme Court upheld the constitutional validity of a 28% GST on online money gaming, ruling that such platforms supply 'actionable claims' and that the levy applies to the full face value of player deposits rather than to the platform's net revenue. The decision validated tax demands reportedly approaching ₹2.5 lakh crore — a retrospective bill so large that, for many operators, it makes the question of future viability almost academic.
Meanwhile, the constitutional challenge to PROGA itself grinds on. Companies argue the blanket ban tramples the freedom to conduct business and unfairly lumps skill-based games in with pure gambling. The Supreme Court has been consolidating the various high-court petitions, meaning the final word on whether India can permanently ban an entire category of digital play is still pending. The outcome will ripple far beyond gaming, touching how India treats every internet business it deems socially risky.
What Comes Next for India's Gamers
The likeliest near-term future is a bifurcated one. On the legitimate side, capital and talent are already rotating toward esports, casual free-to-play titles and the wider creator economy — segments PROGA explicitly protects and which carry no deposit-and-win mechanic. India's competitive gaming scene, with rising prize pools and growing institutional backing, may end up the accidental beneficiary, absorbing engineers and marketers shaken loose by the cash-gaming collapse.
On the shadow side, the trajectory depends entirely on whether the state moves from blocking websites to blocking payments. If UPI access for offshore operators is genuinely choked and banks are pushed to hunt mule accounts, the convenience premium that drives casual bettors offshore could shrink. If not, the data suggests the migration will harden into habit, leaving India with the worst of both worlds: no domestic tax base, no consumer protection, and a population betting more than before on platforms the law cannot touch.
The lesson emerging from India's experiment is one regulators everywhere will study. Demand for betting did not vanish when the legal supply did. It went looking for a door, found one in the payments system, and walked straight through. Closing that door — not just the storefront — is the real test of whether this ban ultimately protects anyone.
Source: businesstoday.in
