Anti-betting law fails. A lesson for crypto?

A year ago, a harsh law barged its way into the maze of legislation. Laced with political grandstanding, the bill was charged through Parliament, becoming law three days after being introduced. It imposed a total ban on online real money games (RMGs), with popular offerings like poker, rummy and cricket.

Non-bailable warrants (NBWs), imprisonment and stiff fines - features to deter virtual casinos and armies of bookies - were permitted under Promotion and Regulation of Online Gaming Act (PROGA). It's extra-territorial jurisdiction, GoI declared, would be used against offshore betting platforms targeting Indian citizens. Backed by documented deaths and evidence of financial ruin caused by betting, votaries of sin economy didn't have a chance. Soon, it was a closed chapter.

However, a chargesheet reportedly filed by ED said a banned gambling app and sister websites, which have laundered ₹90,000 cr so far, are 'still operational and running a huge number of panels'. This is the latest findings of the agency, which investigates forex irregularities and money laundering.


So, here's an illegal betting empire, thriving long after it was banned, run by shadowy characters, with the kingpin pulling levers from a comfortable prison cell in Oman. He's assisted by bookmakers, hawala agents and hired hands to collect money from players, move it through 'mule' bank accounts before transferring overseas. About ₹2,000 cr assets belonging to the notorious app have been frozen, and a few mid-level actors linked to it have been arrested in India while the puppet-masters, with Gulf hideouts and Vanuatu citizenships, remain safely out of the law's reach.

Why did PROGA fail? Is it too early to judge? But rarely, if ever, has a stern, sweeping law, enacted on wings of urgency, has been undermined so fast with such cavalier disregard. Chances are the masterminds may carry on with impunity. Why? Inability to bring them back for various reasons, irresistible incentives in illegal betting justify risks and an inexhaustible supply of players driven by dopamine release from gambling wins (as seen in China and Iran despite tyrannous laws).

A few months before ED disclosed its findings - probably, to gather more evidence, implicate more persons and buy some time - another story, subtly similar, played out. It's about cryptocurrency, and the authorities' decision - conscious or random - to do nothing. RBI officials reportedly told a parliamentary panel, which examined the multiple loose ends in crypto trade, that 'not having a policy is also a policy'.

The stance stems from half-baked crypto frameworks in several countries, and the relatively small Indian crypto market where a meltdown wouldn't move the political or economic needle. Online betting had flourished in a policy void till reports of suicides and losses surfaced. With no rules, many betting firms, like some crypto platforms, indulged in sharp practices, allegedly using bots to rig games and shortchanging players allured by initial wins.

It could have been avoided with steps like KYC rules (as in advanced jurisdictions) to exclude kids and financially weaker players, cooling-off mechanism to fix intervals between games, minimum deposits, and self-exclusion to minimise unsettling incidents and salvage a sector that generated ₹1,200 cr a month from GST alone.

Instead, after letting it fester for years, exasperated rule-makers, who lacked imagination or the will to regulate a complex, tech-based business that some found morally unacceptable, picked a sledgehammer, when a scalpel could have saved the day. But the heavy-handed legislation didn't end the misery. Online betting, now run by non-state actors paying no tax, continues to proliferate.

A similar fate awaits cryptos if the industry is free to figure its way out in a policy twilight zone. While online gambling went underground, states are in a turf war to preserve their rights to regulate offline gambling. Haryana recently passed a law, and the case where states are challenging the constitutional validity of PROGA and the federal overreach is scheduled to come up on Oct 6-7.

While money games bring out the inefficacy of a hurriedly passed law, cryptos reflect helplessness of authorities to frame a new law. It's a milieu where a law student may be reminded of Harold A Linstone, who had said, '...we are approaching the new era with 21st century technologies, 20th century governance process and 19th century governance structures.'

In the uncharted AI landscape, there will be many future clashes between law, technology and finance. It will show up in algorithmic accountability (where persons behind AI take responsibility for their actions), decentralised systems where financial assets are managed by user networks and not banks, and cross-border fragmentation as overlapping and conflicting rules between countries impact deals and data. No regulator or government can ignore them.

Gaming and crypto can hone the skills in tackling them. Instead, we have chosen to wish them away or hush them down.