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Under the Foreign Exchange Management Act, 1999 and its rules and regulations made thereunder (“ FEMA ”) read with the Foreign Exchange Management (Current Account Transaction) Rules (“ Current Account Rules ”), remittance (i) out of lottery winnings, (ii) for purchase of lottery tickets, banned/prescribed magazines, football pools, sweepstakes, etc., and (iii) of income from racing/riding, etc., or any other hobby, is prohibited. Skill games have the potential of being covered under the above provisions under the word “hobby”, as the same has not been defined or expressly categorised. The Payment and Settlement Systems Act, 2007 (“ PSS Act ”) mandates that a person desirous of commencing or carrying on a payment system must obtain an authorisation from the RBI. Payment service providers typically provide clearing, payment and settlement functions, which are highly regulated by the RBI. However, payment gateways and closed-loop wallets are not treated as payment systems. Under the Black Money (Undisclosed Foreign Income Assets) and Imposition of Tax Act, 2015 (“ Black Money Act ”), the Central Board of Direct Taxes (“ CBDT ”) issued a circular providing clarifications pertaining to the Black Money Act. The circular clarified that if an offshore virtual/e-wallet account is used for playing online games/poker and is funded by income chargeable to tax in India on which tax has not been paid and the person makes profit from the said gaming, the person must disclose the account details to Indian tax authorities. According to the circular, a virtual/e-wallet account is treated like a bank account where inward and outward cash movement takes place from the account. Therefore, the valuation and declaration of an e-wallet account may be made as in the case of a bank account. 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