EXCLUSIVE: Karnataka's draft bill puts legal onus on ISPs and payment gateways
The draft bill also brings compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) standards to the forefront of India’s fight against offshore betting operations.
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The Karnataka government has proposed sweeping changes to the state’s policing laws, placing the onus on internet service providers (ISPs) and payment gateways to act as gatekeepers against illegal online betting. The Karnataka government will introduce a comprehensive legislation during the upcoming session of the State Legislature. The proposed bill aims to outlaw all forms of online games of chance while creating a regulated licensing framework for skill-based games.
Under the draft Karnataka Police (Amendment) Bill, 2025 (accessed by Storyboard18), ISPs must block access to unregistered betting websites and apps as soon as they're flagged by the newly established Authority. Simultaneously, payment gateways will be required to freeze all financial transactions—including deposits and withdrawals—to and from these platforms.
The bill also empowers the Authority to mandate geo-fencing and IP-blocking, effectively cutting off access to offshore operators for users in Karnataka. The State Government will also constitute a Karnataka Online Gaming and Betting Regulatory Authority to oversee, regulate, and enforce the provisions.
The Authority shall consist of a Chairperson, appointed by the State Government, with an experience in law, public administration, or technology. Three members, including one expert in information technology, one in finance, and one in social welfare, appointed by the State Government.
The Authority will work closely with the Department of Information Technology and the Karnataka Police Cyber Crime Branch to develop and deploy the necessary infrastructure for digital surveillance and enforcement. This includes issuing cease-and-desist orders, conducting searches and seizures of servers and digital records, and imposing civil penalties of up to ₹5 lakh for repeat offenders.
The draft law allows for the establishment of special courts to ensure swift trials and a designated Appellate Tribunal for appeals against the Authority's orders.
Payment gateways will also have to report any suspicious financial activity linked to illegal betting within 48 hours to both the Authority and the Financial Intelligence Unit – India (FIU-IND). Compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) standards will be mandatory.
Failure to comply could expose these intermediaries to potential legal liabilities, especially if they are found enabling unregistered or illegal operations knowingly or through negligence.
While cracking down on games of chance, the bill offers a regulated path for skill-based gaming platforms. Operators must apply for a license, undergo KYC verification, and comply with safeguards such as a minimum age limit of 18 years, restrictions on predatory advertising, and stringent financial transparency. Licenses will be valid for three years and subject to renewal.
The draft prescribes tough penalties upto three years imprisonment and a fine of ₹1 lakh for those running unregistered betting operations and Up to six months in jail and a fine of ₹10,000 for those aiding or promoting illegal betting, including through ads or celebrity endorsements.
The Bill states, "Any person aiding, abetting, or promoting illegal online betting, including through advertisements or endorsements, shall be punishable with imprisonment for a term which may extend to six months a fine which may extend to ten thousand rupees."
As first reported by Storyboard18, the legislation seeks to draw a clear legal distinction between gambling and games of skill—a long-debated topic in India’s rapidly growing real-money gaming (RMG) industry. However, ambiguity remains around how the state intends to handle offshore betting platforms, whose presence and influence have grown significantly over the past year.
In addition to enforcement, the government plans to launch awareness campaigns to educate citizens on the financial and psychological risks of online gambling.
This marks a policy reversal from the state's previous attempt to ban online gaming entirely. In 2021, Karnataka passed the Karnataka Police (Amendment) Bill, which sought to prohibit all forms of online gambling, inadvertently sweeping skill-based games into the ban.
The Karnataka High Court struck down key provisions of that law in February 2022, declaring them unconstitutional. The matter is now pending in the Supreme Court, which has issued notices to several gaming companies and associations.
