Sri Lanka authorities unsure how to enforce igaming regulation, new rules still under debate
Sri Lanka’s lawmakers and officials are concerned about the nation’s ability to regulate the online gaming sector, despite not currently having any licensed operators, amongst an ongoing debate on policy.
Just recently, officials told the Committee on Public Finance (COPF) that the regulatory launch of new gaming regulations was unable to meet its 30 June deadline and will instead progress later this year.
According to The Morning Telegraph, the regulatory draft is still under review with a Cabinet-appointed committee, with a launch now planned for October 2026.
COPF Chairman Harsha de Silva has been open about his criticism of the delayed regulatory launch, last month, lambasting officials during a parliamentary session, asking about repeatedly missed deadlines since 2022. He also raised the issue of the rise of unregulated online gaming platforms and advertisements, querying officials how they were able to operate in the country without regulatory oversight.
“Using the government’s logo, they are telecasting online casinos for every ball in cricket matches. If no license has been issued, then rewind and watch the last overs; you will see advertisements stating “licensed” with the Sri Lanka logo. How is this happening? Who is approving this?” the official demanded during the session.
The Deputy Commissioner of the Department of Inland Revenue, Kumara Dharmawardena, has also indicated that there are currently 37 licensed operators under the sports betting and horse racing category of wagering business, while there are six licensed casino operators with five currently in operation.
While the law allows for online gaming, the official noted in a recent hearing that, “As far as our records are concerned, no online casino operators have been registered with the Inland Revenue Department.”
Sri Lanka’s Gambling Regulatory Authority Act took effect on 1 December, 2025, with the aim of creating a modern regulatory framework to replace outdated laws governing online betting and land-based casinos. But lawmakers and insiders are concerned that the Act lacks key enforcement actions to truly be effective.
Dharmawardena warned that a significant number of online gaming platforms are present in Sri Lanka but “they do not process transactions through the formal banking system” and rely largely on crypto.
“The act does not explicitly empower the relevant authority to take enforcement action … it is essential that these offenses are investigated. While the law clearly prohibits unlicensed gambling operations, there are practical challenges in enforcing the existing legislation,” noted GRA Chairman Wasantha Nawarathna Bandara.
Other concerns were raised over the lack of consultation with stakeholders during the drafting of the regulatory framework, with COPF members asking officials why industry operators had not been consulted before the draft was finalized. Gambling Regulatory Authority Chairman N.M.W.N. Bandara confirmed that the Board had not engaged with operators.
As well, some worry about how the regulations can actually be enforced.
Recent reporting has warned about a possible rise of online gambling scam hubs in the country, with de Silva advising that more delays could cause further opportunities for criminal networks to establish roots.
Charlotte Capewell brings her passion for storytelling and expertise in writing, researching, and the gambling industry to every article she writes. Her specialties include the US gambling industry, regulator legislation, igaming, and more.
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The Backstory
A regulator arrives before its rulebook
Sri Lanka’s latest struggle over igaming regulation is the product of a familiar policy gap: The country has moved to create a national gambling regulator but has not yet settled the rules, tools or enforcement systems needed to make it effective. The Gambling Regulatory Authority Act took effect Dec. 1, 2025, replacing a patchwork of older laws that were not designed for mobile betting, offshore casino sites, crypto payments or digital advertising around live sports.
The law was meant to give Sri Lanka a modern framework for land-based casinos, sports betting and online gambling. But officials now acknowledge the launch has slipped beyond the original June deadline and remains under review by a Cabinet-appointed committee. The current timetable points to October 2026, leaving a period in which the legal framework exists on paper while the market continues to operate in practice through offshore sites, domestic intermediaries and informal payment channels.
That delay matters because officials have said no online casino operator is registered with the Inland Revenue Department, even as online gambling platforms are visible to consumers. The government’s challenge is no longer simply whether to legalize or prohibit activity. It is whether it can identify operators, police advertising, collect tax and stop illicit networks before the sector becomes too entrenched.
Parliament pressed for speed after years of warnings
The pressure campaign has been led in large part by Harsha de Silva, chairman of the Committee on Public Finance, who has repeatedly accused officials of allowing a legal vacuum to persist. In June, he publicly questioned how unlicensed platforms could advertise during cricket broadcasts and present themselves as licensed, including through promotions that appeared to use Sri Lankan government branding. His criticism, detailed in concerns over the rise of unlicensed igaming platforms, framed the issue as both a consumer protection failure and a revenue leak.
De Silva’s argument has been consistent: If no online casino licenses have been issued, authorities need to explain who is permitting the advertising, who is verifying claims of legality and why enforcement has not followed. He has also warned that billions in potential state revenue may be slipping outside the tax net. That concern has resonated with the Committee on Public Finance, which has pushed the Treasury and Inland Revenue Department to accelerate work on the regulator and align the framework with anti-money laundering and counter-terrorism financing standards.
The earlier plan was more ambitious. Sri Lanka had said the Gambling Regulatory Authority would be established and operational by June 20, 2026, after the committee urged faster implementation. As reported in Sri Lanka’s plan to establish the Gambling Regulatory Authority by June 2026, officials expected the new rules to define licensing conditions, penalties, operating standards and enforcement powers. They also identified online gambling as the central weakness, estimating that 60% to 70% of gaming activity was occurring on foreign websites.
The draft bill widened the state’s ambitions
The current debate follows a legislative process that began with a broader attempt to bring all gambling activity under one national authority. Cabinet approval to publish a draft bill marked a major step toward a centralized regulator, as described in Sri Lanka moving closer to an online gambling authority. The proposed structure was intended to cover offshore and onshore operators, online platforms, gambling linked to ships, activity in Colombo Port City and offshore casinos.
That wide mandate reflected a recognition that the gambling economy had outgrown legacy categories. Sri Lanka already has licensed operators in sports betting and horse racing, along with several licensed casino operators, but online casino activity sits in a more ambiguous space. Inland Revenue officials have said their records show no registered online casino operators, even though the law allows for online gambling under a regulated framework.
The draft also responded to fiscal concerns. A national authority could help improve revenue collection from gambling, particularly if online operators are required to register, report transactions and use traceable payment systems. But the more expansive the mandate, the harder implementation becomes. Officials must decide how to license offshore platforms, how to prevent unlicensed sites from targeting Sri Lankan consumers, how to coordinate with banks and telecom providers and how to sanction operators that may not have a physical presence in the country.
Those practical questions are now slowing the rollout. Lawmakers have also criticized the limited consultation with industry stakeholders during drafting. Gambling Regulatory Authority officials have acknowledged that operators were not engaged before the draft was finalized, raising the risk that rules may be difficult to implement or easy to evade.
Crime concerns raised the stakes beyond tax
The enforcement problem has taken on a cross-border security dimension. Sri Lanka and China recently expanded cooperation against illegal gambling and fraud networks, amid concerns that criminal groups operating in other parts of Southeast Asia have shifted activity to Sri Lanka. The Chinese Embassy in Colombo said authorities were targeting illegal gambling operations linked to fraud, human trafficking and other crimes, according to expanded China-Sri Lanka cooperation against igaming.
That development sharpened the argument for a functioning regulator. Illegal online gambling is not only a matter of lost betting tax. It can intersect with money laundering, cyberfraud, coercive labor schemes and cross-border payment networks. Chinese law bars citizens from operating foreign casinos or investing in them and recent changes criminalized gambling on overseas sites. Sri Lanka’s cooperation with China has included raids, arrests and transfers of some Chinese nationals accused of fraud-related offenses.
For Colombo, the risk is that a slow regulatory rollout creates space for scam compounds and offshore gambling operators to establish a foothold before enforcement systems are ready. De Silva has warned that each delay gives criminal networks more time to organize. Inland Revenue officials have also pointed to crypto use and transactions outside the formal banking system as major barriers. If money moves through wallets, peer-to-peer transfers or foreign accounts, tax authorities and police may struggle to trace operators or customers.
The Gambling Regulatory Authority’s leadership has conceded that the law prohibits unlicensed gambling but may not clearly empower officials with the investigative and enforcement tools needed to act quickly. That distinction is central to the current dispute: A ban without blocking powers, payment controls, advertising rules and investigative authority can become largely symbolic.
Global debates show the same trade-offs
Sri Lanka’s debate mirrors broader tensions in jurisdictions considering igaming regulation. Governments see potential tax revenue and consumer protections in legalization, but opponents warn that easy mobile access can increase gambling addiction, debt and social harm. In the U.S., for example, Virginia lawmakers have continued debating igaming regulation after a proposal stalled pending further study. Supporters projected billions in taxable revenue, while critics raised concerns about addiction, casino jobs, mental health and debt.
The comparison is useful because Sri Lanka is not deciding in a vacuum. A regulator that focuses only on tax could miss the public health and criminal justice dimensions of online gambling. A regulator that imposes strict rules without workable enforcement could push consumers toward offshore sites. The policy balance requires licensing, taxation, advertising controls, safer gambling obligations, transaction monitoring and cooperation across police, tax, banking and telecom agencies.
Sri Lanka’s immediate challenge is sequencing. Officials have a law, a board structure and political pressure to act, but the detailed regulations remain unsettled. Until those rules are finalized, the market will continue to test the limits of the state’s capacity. The outcome will determine whether Sri Lanka can convert a fast-growing grey market into a supervised industry or whether regulatory delay leaves online gambling dominated by unlicensed platforms, untaxed revenue and harder-to-police criminal networks.
