No Banking, No Advertising, No Payments: Head Digital Works seeks urgent SC intervention

India’s online money gaming ecosystem has come to a standstill, with banks cutting off UPI and payout services, payment gateways freezing settlements, and advertising and social media platforms blocking communication channels — a cascading shutdown that has forced Head Digital Works, parent of A23 to move the Supreme Court seeking urgent intervention, warning that the industry has been crippled even before the new gaming law has formally come into force.

The petitioners have filed an Interlocutory Application (IA) for directions, highlighting what they describe as an unprecedented regulatory crisis that has shuttered the industry even before the law has been formally enforced.

In a fresh application submitted ahead of the November 26 hearing in the Supreme Court, the company has sought urgent directions to ensure an uninterrupted hearing of its challenge, arguing that every week of delay is pushing it closer to “corporate death”.

The company informed the Court that although the Act was merely gazetted on August 22 and has not yet been notified under Section 1(3) — the provision that brings it into force — banks, payment gateways, social media platforms and advertising intermediaries immediately withdrew services to all real-money gaming businesses.

Internal communications filed as evidence show that banks such as Yes Bank deactivated UPI collection and payout facilities as early as August 24, citing the enactment of the new law. Payment aggregators, including Easebuzz and Cashfree, also suspended settlements for gaming-linked transactions, froze balances, and directed the company to wind down operations related to real-money gaming until further regulatory clarity.

The fallout extended beyond financial services. Meta’s WhatsApp Business Platform blocked HDW’s business account and required an undertaking of compliance with the Act before permitting restoration of services. The company submitted this undertaking on October 24, declaring that it would not operate real-money games while using WhatsApp channels for user communication.

HDW told the Court that these actions, taken by intermediaries acting under fear of penal exposure for facilitating money gaming transactions, resulted in an overnight and complete disruption of its operations.

The petitioners stated that the industry-wide service withdrawal has caused a total business shutdown since August. HDW has not generated any revenue for nearly three months but continues to incur operational expenses of more than ₹10 crore every month. The company informed the Court that its workforce has already shrunk from 606 employees to 178 employees due to the collapse in revenue, and that the remaining jobs may also be lost unless the matter is urgently heard and adjudicated.

In a significant development for the sector’s investment climate, HDW’s foreign investor, Clairvest Group Inc., has written off its entire investment of approximately ₹760 crore in the company. In its quarterly earnings released on November 12, the Canada-based private equity firm disclosed that the write-off was the primary reason for its consolidated net loss of CAD 76.8 million for the September quarter.

The firm noted that its exposure to HDW had suffered a “material adverse regulatory development” due to the sweeping prohibitions introduced by India’s new gaming law. Clairvest added that, given its experience in India and other international markets, it intends to concentrate its future investments within North America. HDW argued that this public write-off has severely restricted its ability to raise fresh capital and signals a broader erosion of investor confidence in the Indian online gaming ecosystem.

The company also highlighted that the industry as a whole is facing unprecedented turmoil, with most Indian gaming platforms having shut operations and several players laying off nearly 80 per cent of their staff. Some companies are reportedly in insolvency proceedings. HDW told the Supreme Court that user attrition has accelerated sharply since its platforms can no longer host real-money games, and that rebuilding a user base after prolonged inactivity would require investments equivalent to creating an entirely new business. The company warned that its very survival hinges on securing relief before the ecosystem deteriorates further.

The petitioners have also expressed concern about the procedural delays that may affect the next crucial hearing. The Supreme Court, in its orders dated October 7 and November 4, had directed the Union of India to file a comprehensive reply “well in advance” of the November 26 hearing. However, the government has not yet filed its response. The company fears that this delay could push the hearing further, thereby deepening the financial and operational distress it is facing. HDW has therefore moved an interlocutory application requesting that the Court direct the Union to file its reply no later than November 24, to ensure that the November 26 hearing proceeds without disruption.

In a separate letter of urgency submitted to the Supreme Court Registry, HDW’s counsel Pritha Srikumar Iyer reiterated that the situation constitutes grave urgency, as the Act has caused the withdrawal of essential banking, financial and marketing services across the sector even before it has come into force. The letter states that the industry-wide shutdown amounts to a de facto implementation of the law, and that such premature enforcement has already caused significant and potentially irreversible harm to the constitutional rights of the petitioners.

The mentioning request has been placed before the Bench of Justices J.B. Pardiwala and K.V. Viswanathan, with the petitioners seeking permission to mention the matter on November 21 so that the IA can be urgently considered.

With revenue streams frozen, investor confidence shaken, user activity deteriorating and the workforce thinning by the week, the case now represents one of the most consequential legal challenges for India’s online gaming sector. All eyes will be on the Supreme Court as it takes up the plea later this month, in what may determine whether the industry can survive the regulatory shock unleashed over the past three months.