Whalesbook
Legal Stay Granted to GamesKraft
The Karnataka High Court has issued an interim stay on the Enforcement Directorate's (ED) ongoing money laundering investigation concerning real money gaming startup GamesKraft. This significant development arose from a plea filed by the company, which sought to quash the investigation. The court's decision on January 22, 2026, was based on the argument that the ED's Enforcement Case Information Report (ECIR) was founded on a First Information Report (FIR) that had already been closed by the jurisdictional police due to a lack of incriminating evidence. The court noted that if the predicate offense has been closed, the basis for the ECIR has vanished, rendering further enforcement efforts untenable.
ED's Counter-Argument and Next Steps
While the ED acknowledged the closure of the specific FIR cited by GamesKraft, the agency contended that six other FIRs related to the company remain under active investigation. The additional Solicitor General, representing the ED, argued that these pending FIRs could form the basis for the ongoing ECIR. The court has granted the ED permission to file a response detailing these other pending cases. The matter is scheduled for its next hearing on February 6, 2026, at which point the ED will be expected to present its case for sustaining the investigation based on these additional offenses.
Background of the Enforcement Directorate Probe
The ED's investigation, initiated under the Prevention of Money Laundering Act (PMLA), centers on allegations of cheating and money laundering linked to GamesKraft and its parent entity, Nirdesa Networks, which operates the online poker platform Pocket52. In November 2025, the ED conducted searches at offices and residences associated with both entities in Bengaluru and Gurugram. During these searches, electronic devices and company data were seized. The agency also reported freezing eight escrow accounts holding approximately ₹18.57 crore, identified as suspected proceeds of crime, in addition to over ₹30 crore held in other escrow accounts. The probe was reportedly initiated following an FIR alleging significant fraud on the Pocket52 platform, including manipulated game outcomes and withdrawal restrictions, with one complainant reportedly claiming losses exceeding ₹3 crore.
Regulatory Landscape and Internal Challenges
This legal development occurs against the backdrop of a nationwide ban on real money gaming (RMG) enacted through the Promotion and Regulation of Online Gaming Act, 2025, on August 22, 2025. The implementation of this Act has led to significant industry-wide restructuring and considerable layoffs. GamesKraft itself laid off over 400 employees as part of organizational restructuring, citing the changed operating environment post-Act. The company has also been addressing internal governance issues, including accusations against its former CFO, Ramesh Prabhu, for allegedly siphoning off approximately ₹270.43 crore for personal trading. An FIR was filed in September 2025 concerning these allegations, leading to a write-off of around ₹270 crore in GamesKraft's financial statements.