The Karnataka High Court declared the Enforcement Directorate's arrest of three Gameskraft founders illegal, ordering their immediate release. The ruling is a major legal win for India's real‑money gaming industry — and a stinging rebuke to the agency's tactics.
The three men had been behind bars for more than five weeks. On May 7, the Enforcement Directorate had swept through 17 locations across Karnataka and the National Capital Region — offices, homes, and associate premises — seizing documents, laptops, and phones. The next day, Deepak Singh, Prithvi Raj Singh, and Vikas Taneja — the founders of Gameskraft, one of India's largest online real‑money gaming platforms — were arrested under the Prevention of Money Laundering Act.
The ED's case was serious. The agency alleged that Gameskraft had laundered around ₹250 crore through its operations, employed deceptive practices to attract users, and manipulated gameplay to induce higher deposits. Several FIRs registered against the company were linked to alleged suicides of individuals who reportedly suffered losses on the gaming platforms. The founders were sent to judicial custody, their freedom stripped away.
Then, on June 16, 2026, Justice M. Nagaprasanna of the Karnataka High Court did something that sent shockwaves through India's real‑money gaming industry. He declared the arrests "contrary to law" and ordered the founders' immediate release.
The ED had lost. And it had lost badly.
The Arrest That Should Never Have Happened
The Gameskraft case had been brewing for years. The company, which operates popular online real‑money gaming platforms including RummyCulture and RummyTime, had been under regulatory and legal scrutiny for some time. In 2024, a user of the company's gaming platforms filed a complaint with the Bengaluru police, alleging a loss of ₹3 crore. The police registered an FIR, and the ED subsequently registered an Enforcement Case Information Report (ECIR) based on it.
Between November 18 and 25, 2025, the ED conducted extensive searches across Gameskraft's premises. But here's the critical detail: the ED did not deem arrest of the founders necessary at that time. Despite the searches, despite the allegations, despite the material they had gathered — the founders remained free.
Then came a legal twist. In January 2026, the Karnataka High Court stayed the money laundering investigation against Gameskraft, noting that the Bengaluru police had filed a closure report in the case after the company settled with the complainant — effectively "removing its foundation".
The ED, however, was not done. On February 23, 2026, it registered a new ECIR based on three FIRs filed in Telangana, alleging losses suffered by players on the company's gaming platforms between 2017 and August 2025. The agency argued that the fresh case was based on new material uncovered during its investigation.
But the court saw through it.
The Court's Rebuke: "Recycled Suspicion"
Justice Nagaprasanna's ruling was a masterclass in judicial reasoning. He pointed out that the ED had neither summoned the founders for participation in the probe despite the new ECIR in February 2026, nor conducted searches of their premises till May. The new grounds for arrest, served to the petitioners after searches conducted on May 7-8, were merely "repackaged" versions of the same old allegations from the earlier ECIR.
The court found that the ED had arrested them without issuing summons under Section 50 of the Prevention of Money Laundering Act. There was no new material to justify the arrests — the ED had simply recycled old suspicion.
In a passage that will be quoted for years, the court observed: "the attempt to justify arrest on the strength of material already in possession of the ED from earlier proceedings runs contrary to the very architecture of Section 19(1) of the PMLA. The provision contemplates an assessment of the material available at the time of arrest; it does not countenance the resurrection of stale material to manufacture a fresh justification for deprivation of liberty. Section 19 [power to arrest] is not elastic enough to permit arrest on recycled suspicion when no new incriminating material is unearthed".
The court also noted that the ED had conducted searches in November 2025 on the same set of allegations, and had not found it necessary to arrest the founders at that time. The subsequent arrests, the court held, were based on "stale material" and violated the founders' constitutional right to liberty.
"The power to arrest may be statutory, the right to liberty is constitutional," the court underlined.
The Legal Arguments
The case pitted two of the most powerful legal minds in the country against each other. Appearing for the ED, Additional Solicitor General SV Raju argued that the agency had uncovered substantial new material during its investigation. He submitted that proceeds of crime worth ₹187 crore had been diverted through Gameskraft, and that allied entities had made overseas direct investments worth around ₹100 crore. He argued that further investigation required the continued custody of the accused.
Senior advocate S. Muralidhar, who appeared for Deepak Singh, argued that the ED had failed to comply with the requirements of Section 19 of the PMLA, which governs arrest powers. He contended that the search conducted on May 7 and 8 did not yield the material that formed the basis of the arrests. The grounds of arrest, he argued, were based on material already available to the agency and not on evidence gathered during the search operation.
The court agreed with Muralidhar. It found that the ED's actions amounted to an abuse of process — using the same material, repackaged through new FIRs, to achieve what it could not achieve through the original investigation.
What the ED Alleged
The ED's case against Gameskraft was built on serious allegations. According to the agency, the company operated online real-money gaming platforms and engaged in unfair practices to entice users into the games. The agency alleged that Gameskraft laundered around ₹250 crore through its operations and employed deceptive practices to attract users on its real-money gaming platform.
The ED claimed the company lured users through incentives while manipulating gameplay to induce higher deposits. It also alleged that the company was involved in bogus transactions and cash dealings. Several FIRs registered against the company were linked to alleged suicides of individuals who reportedly suffered losses on the gaming platforms.
The agency also claimed that proceeds of crime worth ₹187 crore had been diverted through Gameskraft and that allied entities had made overseas direct investments worth around ₹100 crore. The ED had registered the money laundering case against Gameskraft Technologies Ltd and associated entities on May 28.
But the court found that the ED had overreached. The agency had arrested the founders without complying with the procedural requirements of the PMLA, and had relied on "stale material" to justify the deprivation of liberty.
The Aftermath: A Major Win for the Gaming Industry
The ruling is a major legal victory for India's real‑money gaming industry, which has been under intense regulatory and legal scrutiny in recent years. The industry has faced multiple challenges — from state bans on online gaming to ED investigations and tax demands. The Gameskraft ruling sends a clear message: enforcement agencies must follow procedure, and cannot use the PMLA as a weapon to bypass due process.
While the court allowed the ED to proceed against the founders by issuing summons, the message was clear: enforcement agencies must follow procedure. The ED's tactics, at least in this case, were found wanting.
The ruling also has implications beyond the gaming industry. The PMLA has been increasingly used by enforcement agencies in recent years, and questions have been raised about the balance between combating money laundering and protecting individual liberties. The Gameskraft ruling is a reminder that even in the fight against financial crime, the constitution must be respected.
The Bottom Line
On June 16, 2026, the Karnataka High Court did something that the ED had not anticipated. It declared the arrest of three Gameskraft founders illegal, ordered their immediate release, and made it "abundantly clear" that the ED cannot use recycled suspicion to justify deprivation of liberty.
The ruling is a major legal win for India's real‑money gaming industry — and a stinging rebuke to the ED's tactics. The agency had arrested the founders without complying with procedural requirements, and had relied on stale material to justify the arrests. The court's message was clear: the power to arrest may be statutory, but the right to liberty is constitutional.
For the founders, the ruling means freedom. For the gaming industry, it means a precedent that will make it harder for enforcement agencies to use the PMLA as a weapon. For the ED, it means a loss — and a reminder that even in the fight against financial crime, the law must be followed.
The ED can still issue summons and proceed further in accordance with law. But for now, the founders of Gameskraft are free. And the ED is left to ponder how it lost a case it was so sure it would win.
