• Foreign nationals linked to cyber scam operations remain a parallel law-enforcement concern
• Addiction specialists warn users are gambling away salaries and borrowing to cover mounting losses
• Banks block known gambling transactions, but operators exploit crypto and other payment workarounds
• Online gaming systems can be manipulated without independent regulatory scrutiny, experts warn 
• Gambling Regulatory Authority Act in force, but supplementary regulations still awaited
• Existing casino laws are inadequate to tackle online gambling: COPF 
• Lack of reliable local data may be masking true scale of gambling-related harm

In the rapidly evolving landscape of Sri Lanka’s digital economy, an unchecked surge in online gambling and cyber-enabled scams is quietly brewing into a major socio-economic crisis. 

Driven by widespread smartphone adoption, aggressive sports-betting marketing, and a complete absence of an updated legal and regulatory framework, concerns are growing that thousands of Sri Lankans are becoming vulnerable to financial exploitation and behavioural addiction. 

At the same time, law enforcement authorities are battling an influx of foreign nationals overstaying their visas to operate clandestine operations out of rented apartments and commercial properties across the island.

Speaking to The Sunday Morning, key stakeholders across law enforcement, addiction rehabilitation, and cybersecurity warned that without swift State intervention, clear legislative updates, and centralised governance, the country risked falling further behind an increasingly sophisticated digital threat.

Foreign scam hubs

Addressing the rising prevalence of cyber-enabled fraud and overstaying foreign nationals, Police Spokesperson ASP F.U. Wootler explained that Sri Lanka faced significant challenges with foreign visitors overstaying their visas and engaging in illegal cyber activities.

“Sri Lanka has reached its confinement issue, and it is a challenge that most foreigners who come to Sri Lanka sometimes overstay and get involved in scams,” ASP Wootler stated. He noted that law enforcement agencies, including the Computer Crime Investigation Division (CCID), had taken decisive action to apprehend and deport those involved.

“In 2024–’25, there were almost 700 arrests of foreign nationals. Most of them were deported and they have now been blacklisted; they will not be able to return,” he said.

ASP Wootler stressed that while the Police had conducted wide ranging public awareness drives across all three official languages, property owners must exercise caution when leasing out apartments, houses, rest houses, or commercial facilities. He said that targeted operations had significantly curtailed major foreign-led scam operations in recent months, forcing most illicit actors out of the country.

In recent years, cross-border online gambling and telecom fraud have continued to occur frequently worldwide and have evolved into a typical form of transnational organised crime. According to the Embassy of the People’s Republic of China in Sri Lanka, the perpetrators, victim groups, and operational areas of such crimes display pronounced international characteristics. 

The United Nations Office on Drugs and Crime has also pointed out that these scam centres are spreading from Southeast Asia to other regions, with criminal networks becoming increasingly intertwined with human trafficking. Chinese nationals are among the primary victim groups of such crimes.

The gateway to addiction

While law enforcement tackles external scam operators, local addiction experts warn of an internal crisis taking root inside households across the island.

Sumithrayo Drug Demand Reduction Programme (Mel Medura) Honorary Director Jomo Uduman pointed out that while traditional, physical casinos had historically attracted “hardcore gamblers,” the ubiquity of smartphones had drastically lowered the barrier to entry for online gambling.

“The smartphone is the gateway to all these things, and it is becoming a crisis where people are gambling their salaries away,” Uduman told The Sunday Morning. “People who are in debt, for instance, think they can finally get enough money to sort out their debt if they gamble, which is always a significant issue. When they keep losing, they fall into a spiral of losing and hoping for a big win that never happens.”

Uduman emphasised that unlike physical gambling, online platforms carried severe social stigma and shame, causing many victims to conceal their struggles until they were plunged deep into financial ruin. Furthermore, aggressively marketed betting platforms – frequently advertised during international sports broadcasts and on stadium hoardings – normalise betting behaviour among young demographics.

“At Mel Medura, there haven’t been many cases where people explicitly seek help for online gambling addiction; they often try to sort it out by borrowing money again to cover their debts,” Uduman explained, noting that countries like the Philippines and Indonesia were already grappling with widespread online gambling crises. 

“In Sri Lanka, the issue has not been researched as much, and there is a lack of validated data and statistics. The situation is seen as brewing into a crisis,” he added.

Adding on to the matter, Sumithrayo Chairperson Suranjani Wickremeratne said: “We get a lot of callers in distress about having spent all their money. Gambling is an addiction. It is a menace to society, and those who are addicted need a lot of therapy to get out of it.” 

The governance void

From a cybersecurity and governance standpoint, the exponential rise in online gambling exposes deeper structural flaws within Sri Lanka’s regulatory apparatus.

Digital Trust Alliance (DTA) President Lakmal Embuldeniya highlighted that digital platforms had eliminated the physical and social barriers that previously constrained gambling activity.

“Originally, people had to go to a particular place which was more or less aligned with their stature. That problem is no more; anyone can log into a website through their phone,” he said, highlighting the fact that availability had increased significantly.

Embuldeniya further warned that in the absence of an active State regulator or oversight authority, operators could easily build online platforms and manipulate back-end probability algorithms to ensure guaranteed profitability at the user’s expense.

“It’s not that you go and throw a dice physically; you throw a dice within an online system. There is no way to identify whether the result you get is true or false. It’s not a cybersecurity problem; it is purely a governance and digital trust problem,” he emphasised.

Drawing parallels to heavily regulated hubs like Las Vegas – where automated and digital gaming systems make up over 80% of operations and are subjected to rigorous State auditing and code inspection – Embuldeniya noted that Sri Lanka lacked both the legislative mechanics and the technical competency to audit such systems at present.

Financial workarounds and State capacity

While major local commercial banks have taken steps to block direct credit card transactions on known international gambling sites, illegal operators routinely exploit grey market workarounds. These include local rupee-to-cryptocurrency exchanges and peer-to-peer virtual card-loading mechanisms.

Embuldeniya urged Parliament and the Treasury to immediately extend existing physical gambling regulations to cover the online space as a baseline legal stopgap, while building long-term technical competency within regulatory bodies.

“If the law can be amended to state that regulations related to current physical gambling are applicable to online platforms, that would be sufficient at the moment to establish jurisdiction in court,” he noted. “However, the Government must then address the competency of the regulator. Evaluating these software systems requires high-calibre software and security architects – a level of technical expertise that State institutions currently lack.”

At present, Sri Lanka’s regulation on gambling comes from the Gambling Regulatory Authority Act No.17 of 2025 which came into effect on 1 December 2025. However, the act requires the supplementary regulations under discussion in order to become operational. 

Concerns raised at COPF

The Committee on Public Finance (COPF) has on several occasions raised concerns over the rapid growth of illegal online gambling and the regulatory gaps that have allowed such operations to flourish in the country.

COPF Chairman and MP Harsha de Silva recently warned Parliament that Sri Lanka was emerging as an international hub for illegal online gambling, which he said had become increasingly popular among Sri Lankan youth and children.

“Sri Lanka is actually becoming an illegal online gambling hub,” de Silva said, noting that more than 40 payment methods were available for transactions on such platforms.

“It is a shame that Sri Lanka has earned such a reputation. The absence of proper laws has led to this situation,” he said, adding that some online gambling operators were registered overseas, making them difficult to regulate locally.

De Silva said that existing laws governing casinos were inadequate to regulate online gambling and noted that the Central Bank of Sri Lanka had failed to provide satisfactory answers to 18 questions submitted by the COPF in April regarding the issue.

He added that Gaming Regulatory Authority Chairman N.M.W.N. Bandara had informed the COPF that regulations governing the sector could be implemented by November, although the regulations had yet to be finalised.

While highlighting the importance of proposed legislation on money laundering, financial transaction reporting, and terrorist financing, de Silva stressed the need to close regulatory loopholes that allowed illegal online gambling operators to evade oversight.

As online activities continue to operate in a legal grey zone, experts agree that without immediate policy reform, transparent governance, and stringent enforcement, Sri Lanka remains dangerously exposed to the societal and financial fallouts of an unregulated digital frontier.