India’s Ministry of Electronics and Information Technology (MeitY) has issued a sweeping directive to Internet Service Providers (ISPs) and Virtual Private Network (VPN) companies to block access to major cryptocurrency prediction markets, including Polymarket and Kalshi, citing violations of national betting and financial reporting laws.
By Ana Gonzalez | May 18, 2026
The regulatory environment for digital assets in India reached a new boiling point on May 18, 2026, as the government moved to shut down access to decentralized prediction platforms that have gained massive traction during recent global political events. This latest enforcement action by MeitY coincides with the implementation of stringent new penalties under India’s updated financial regulations, which targets retail investors and platforms failing to provide granular transaction data. As Bitcoin trades at $76,650 and Ethereum hovers around $2,107, the Indian crypto community is bracing for an era of “hyper-compliance” where even minor reporting inaccuracies can result in crippling financial penalties.
The Legislative Move
The primary catalyst for today’s market friction is a dual-pronged approach by the Indian government. First, MeitY has invoked Section 69A of the Information Technology Act to direct ISPs and VPN providers to block the URLs and IP addresses associated with leading decentralized prediction markets. The ministry argues that these platforms facilitate “unlawful online betting” through the use of stablecoins, bypassing the traditional oversight of the Public Gambling Act. Unlike previous blocks that focused on offshore exchanges, this directive specifically targets DeFi protocols that operate without a centralized entity, signaling a shift toward infrastructure-level censorship.
Simultaneously, India’s updated financial regulations has introduced a new regime of penalties for Virtual Digital Asset (VDA) holders. According to the updated statutes, individuals failing to furnish accurate transaction statements to the Financial Intelligence Unit (FIU) now face a daily fine. More critically, any detected inaccuracy in reporting—whether intentional or accidental—is now subject to a flat penalty per reporting inaccuracy. This move is designed to force a significant portion of Indian traders known to use offshore platforms back into the domestic, regulated ecosystem by making the cost of non-compliance prohibitively high.
Jurisdiction Context
To understand the gravity of these measures, one must look at the fractured nature of India’s crypto oversight. While the Reserve Bank of India (RBI) remains vocally opposed to private cryptocurrencies, the Ministry of Finance has focused on revenue extraction through the 30% tax on gains and the 1% Tax Deducted at Source (TDS). Today’s intervention by MeitY adds a third layer of complexity: content and platform regulation. By labeling prediction markets as betting entities rather than financial instruments, the government can bypass the ongoing debates over the legal status of crypto as “property” or “currency.”
This jurisdictional shift places India in a unique position compared to other Asian hubs. While Hong Kong is expanding into regulated perpetual contracts and Singapore is consulting on permissionless blockchain bank capital rules, India is tightening the perimeter. The FIU has already registered nearly 30 domestic entities, but the offshore drain remains the government’s primary concern. By targeting the “on-ramps” and access points (VPNs and ISPs), the authorities are attempting to create a “walled garden” for Indian digital asset participants.
Industry Reaction
The reaction from the Indian tech and crypto sectors has been one of deep concern, particularly regarding the VPN directive. Industry groups representing digital rights have warned that forcing VPN providers to block specific crypto protocols could undermine general internet privacy. “The technical feasibility of blocking a decentralized protocol via IP-level filtering is questionable,” noted one legal expert from a prominent New Delhi-based think tank. “Users will likely shift to more obfuscated methods, creating a cat-and-mouse game that helps no one.”
Domestic exchanges like CoinDCX and WazirX have maintained a cautious stance, emphasizing their commitment to compliance while acknowledging the hardship these rules place on users. Many retail traders, however, are vocal about the penalty for reporting inaccuracies. “In a market where gas fees and slippage can change transaction values in seconds, expecting 100% reporting accuracy is unrealistic,” said an active DeFi participant on social media. The sentiment is reflected in the broader market, where Solana at $84 and XRP at $1.38 are being traded with increased caution by Indian participants wary of triggering a reporting audit.
Compliance Hurdles
The path to compliance for the average Indian investor has become a minefield of data management. To avoid the daily fine, users must now maintain a real-time ledger of every swap, stake, and transfer across multiple chains. For those using Hardware Wallets or Layer 2 solutions like Polygon, the lack of automated tax tools that integrate directly with Indian ITR forms remains a significant hurdle. Key data points currently required for compliance include:
- Transaction Hash Verification — Every trade must be linked to a verifiable on-chain hash.
- INR-Value at Time of Trade — Gains must be calculated based on the exact rupee value at the moment of the transaction, not a daily average.
- Counterparty Identification — In some cases, the FIU is requesting “reasonable efforts” to identify the nature of the smart contract or entity on the other side of a trade.
Furthermore, the MeitY block means that users attempting to access prediction markets via VPNs may be flagged by their service providers. Under the 2022 CERT-In directives, VPN companies are required to maintain user logs; the intersection of these logs with the MeitY block list could expose users to direct inquiry from enforcement agencies.
What’s Next
As we look toward the second half of 2026, the focus will shift to the enforcement of the inaccuracy fine. Analysts expect the first wave of notices to be issued in July 2026, following the conclusion of the current tax filing cycle. There is also anticipation regarding the Ministry of Finance’s upcoming “Crypto Discussion Paper,” which has been promised for nearly two years. This paper is expected to clarify whether tokenized securities and Real World Assets (RWAs) will be subject to the same draconian tax regime as speculative assets.
For now, the MeitY directive serves as a stark reminder that the “Wild West” era of Indian crypto is over. Whether these blocks will effectively curb the use of offshore prediction markets remains to be seen, but the message is clear: Compliance is no longer optional; it is the price of entry. As the market eyes BNB at $640 and Cardano (ADA) at $0.2489, the Indian investor must weigh the potential for profit against a regulatory regime that is increasingly willing to use its full enforcement weight to ensure total visibility.
The cryptocurrency market remains highly volatile. This article is for informational purposes only and does not constitute financial advice.
blocking polymarket while actual betting apps run ads during cricket matches is peak india policy logic
MeitY going after VPN providers too is the wild part. they basically want full visibility into everyones browsing now