Indian foreign exchange laws prohibit foreign currency transactions pertaining to betting and gambling. Foreign exchange laws are under the ambit of union government and the restriction is therefore common across the country irrespective of whether a state permits betting and gambling or not.
Read: The legal framework for betting and gambling
If a gaming activity qualifies as betting and gambling, foreign direct investment is not permitted in such entity.
Foreign exchange requirements for betting in India
Indian foreign exchange laws require companies to report of any foreign investment within a specified time frame. The Reserve Bank of India (RBI) has, in some instances, while scrutinising these investment reporting has raised questions to gaming companies regarding the permissibility of foreign investment. One such reported incident is related to PlayGames24x7.
Games24x7 had issued certain equity shares to foreign investors for the period 23rd June, 2006 to 1st February, 2012 but failed to file necessary reports within 30 days as required by foreign exchange regulations. To settle and compound the necessary procedural lapses, PlayGames had filed a compounding application with the RBI. The Reserve Bank, however, asked the company to seek clarification from the Department for Promotion of Industry and Internal Trade (DPIIT) and Ministry of Commerce & Industry regarding the legality of their activity and despite writing to DPIIT multiple times, Play Games claimed that it did not receive any response.
While there remains some level of ambiguity and risk regarding online real money gaming, no action has been taken by RBI on this.
Noting previous judgments of Supreme Court, the Bombay High Court on plea by PlayGames directed the RBI to process the application as the games offered by PlayGames do not qualify as gambling. Online gaming entities that do not qualify as gambling businesses have received foreign investment in billions of dollars in the country.
FEMA requirements for betting and gambling
The restrictions under foreign exchange laws is also applicable to outbound investment. In August 2022, the Central Government has come up with a new overseas direct investment (ODI) regime pursuant to which Indians are prohibited from investing in gambling ventures in foreign jurisdictions. The prohibition is also applicable to transactions related to betting and gambling by individuals.