ED raids trigger panic in Gaming sector as firms question legal basis, refund mandate

The Enforcement Directorate’s recent action against WinZO and Gameskraft has sent shockwaves through India’s online real money gaming ecosystem, with several platforms expressing deep concern over the timing and legal sustainability of the crackdown—especially as the Promotion and Regulation of Online Gaming Act (PROGA), 2025) has not yet come into force.

Industry stakeholders say the ED’s move has created confusion, particularly around the treatment of unwithdrawn user funds at a time when the draft Promotion and Regulation of Online Gaming (PROG) Rules, released by MeitY on October 2, are still under consultation.

Under the draft rules, companies are expected to repay users’ pending balances within a 180-day window once the Act is enforced. According to Rule 24, any funds due to users before enforcement may be remitted without such transfers being treated as facilitating money-gaming transactions. After this 180-day grace period ends, platforms cannot legally remit such funds, as doing so could be construed as enabling banned money-gaming services.

Given that PROGA is yet to be notified, companies argue the ED’s actions appear misaligned with the upcoming regulatory architecture.

Firms Alarmed as ED Flags Unreturned Balances

According to the ED, WinZO continued operating real-money games in foreign jurisdictions—including Brazil, the US and Germany—from India using the same platform as its domestic operations. Investigators also claim the company held ₹43 crore belonging to users, even after the Union Government’s ban on RMGs effective August 22, 2025.

This allegation has put other platforms on edge, especially smaller operators that are still struggling to clear dormant wallets.

A Rajasthan-based gaming startup said the situation has pushed them to the brink: “We are on the verge of winding down the company. We’ve asked users repeatedly to withdraw their funds, but most simply never respond,” a senior executive said, requesting anonymity.

The founder added that the company is willing to comply with any mechanism prescribed by the government—even depositing the amounts with a regulator: “If the government gives clarity, we can transfer these balances to SEBI or RBI. But our T&Cs treat unclaimed balances as revenue after a fixed period. We need a rulebook before punitive action begins.”

Escrow Accounts Frozen, Payouts Halted

In the case of Nirdesa Networks Pvt. Ltd. (NNPL) and Gameskraft Technologies Pvt. Ltd. (GTPL), the ED has frozen eight escrow accounts with combined balances of ₹18.57 crore, citing suspicion of proceeds of crime being parked by entities including NNPL and Pocket52.

Escrow accounts form the backbone of payout operations in real-money gaming, facilitating movement between users and the platform.

A compliance official at a mid-sized gaming company said the freezes have created fear across the sector, “Escrow accounts are not profit accounts—they hold player money. If these are frozen, payouts stop immediately. This affects users, not just companies.”

Legal analysts argue that the ED’s reliance on alleged violations related to real-money gaming may not stand firm, given that PROGA 2025 has yet to be notified, and the framework governing refund procedures is still in draft form.

One policy expert advising gaming firms on the new legislation noted, “The draft rules explicitly allow a 180-day repayment period once the Act is in force. If the Act hasn’t even in, it raises serious questions about whether non-refund of balances right now can be treated as wrongdoing.”.

Stakeholders say their biggest concern is the lack of clarity around dormant user balances—a long-standing pain point for gaming platforms.

Platforms earlier sought clarification from the government on a critical operational question: If a user does not withdraw their wallet balance despite repeated reminders, can the platform unilaterally push the remaining amount to the user’s last verified bank account?

An executive from a top gaming federation said the ambiguity is being exploited to justify enforcement. “We have KYC bank details. If we push funds back proactively, will it be treated as refund or illegal facilitation? The rules are unclear, and companies don’t want to trigger further action.”

Another industry representative added, “Firms are paralysed. They’re scared of issuing refunds and equally scared of holding balances. The ED’s actions have created a compliance vacuum.”

With PROGA 2025 yet to come into force, the industry is appealing for urgent clarity from MeitY and the Finance Ministry to prevent further disruptions.

Stakeholders say that until the Act and rules are enforced—along with clear instructions on user wallets, refund mechanisms, dormant accounts and escrow liabilities—the ecosystem will remain in a state of uncertainty.

ED's action has resulted in the freezing of more than ₹505 crore linked to WinZO Games Pvt. Ltd., in addition to seizures and account freezes connected to Pocket52 operator Nirdesa Networks Pvt. Ltd. (NNPL) and Gameskraft Technologies Pvt. Ltd. (GTPL).

According to the ED, its Bengaluru Zonal Office conducted coordinated searches at four locations in Delhi and Gurgaon as part of an ongoing probe against WinZO Games Pvt. Ltd., which operates the WinZO real-money gaming app. The agency froze proceeds of crime valued at about ₹505 crore, including bank balances, fixed deposits, bonds and mutual funds, under Section 17(1A) of PMLA.