SEBI Cautions Investors Against Opinion Trading Platforms in India

What’s in Today’s Article?

• Opinion Trading Platforms Latest News
• Opinion Trading Platforms
• How Opinion Trading Platforms Operate
• SEBI’s Key Concerns on Opinion Trading Platforms
• Opinion Trading Platforms FAQs

Opinion Trading Platforms Latest News

• SEBI has warned investors against ‘opinion trading platforms,’ a new form of online betting in India that allows users to wager on real-life events. 
• Although these platforms have operated without much oversight until now, authorities are beginning to scrutinize them due to their rapid growth. 
• The sector has attracted over ₹4,200 crore in funding from major investors like Sequoia Capital and Y Combinator, with annual transaction volumes exceeding ₹50,000 crore and a user base of over 5 crores. Revenue for the industry is expected to cross ₹1,000 crore in FY 2024-25. 

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Opinion Trading Platforms

• Opinion trading platforms allow users to place bets or trade on the outcome of yes/no propositions related to real-world events. 
• The payout is determined by whether the predicted event occurs. 
• These platforms often mimic investment platforms by using financial terms like “profits,” “stop loss,” and “trading.”

Imitating Investment Platforms

• To appear legitimate or investment-oriented, some of these platforms use language typically associated with securities trading, which may mislead users into believing they are making genuine investments rather than bets.

Key Players in India

• Prominent Indian companies in this space include:
  • Probo (Gurugram-based): Offers prediction markets across diverse topics like sports, elections, and cryptocurrency.
  • MPL Opinio: Focuses solely on cricket-related predictions.

How Opinion Trading Platforms Operate

• Betting on Real-Life Events
  • These platforms let users earn money by predicting the outcomes of real-world events such as sports matches, elections, weather changes, or cryptocurrency trends. 
  • Users place bets on “yes” or “no” type questions.
  • For instance, users may be asked: “Will political party X win the election by a margin of N?” 
  • If their answer is correct, they win money; if incorrect, they lose their stake.
• Varied Themes and Topics
  • Popular themes include:
    • Outcomes of cricket and other sports matches
    • Individual athlete performances (e.g., runs scored or goals made)
    • Financial predictions like whether Bitcoin will reach a specific value
• These platforms blend elements of gambling with the structure of trading, offering financial incentives for accurate predictions.

SEBI’s Key Concerns on Opinion Trading Platforms

• Outside SEBI’s Regulatory Scope
  • SEBI clarified that opinion trading platforms generally fall outside its jurisdiction, as the activities conducted do not involve trading in recognized securities. 
  • Therefore, these platforms are not regulated or registered with SEBI.
• Unrecognized and Illegal Trading
  • If any opinion traded on these platforms qualifies as a security, such trading becomes illegal since these platforms are not authorized stock exchanges. 
  • SEBI emphasized that no investor protection mechanisms will apply in such cases.
• Risk of Regulatory Action
  • SEBI warned that these platforms could face legal consequences for violations. 
  • It also directed recognized stock exchanges to act against any such infractions.
• Global Regulatory Landscape
  • Countries like the US, UK, and Australia regulate opinion trading platforms. 
  • In the US, Kalshi operates under CFTC oversight. 
  • However, platforms like Polymarket have faced legal issues for not being registered with regulators, indicating the complexities involved.
• India’s Regulatory Vacuum
  • India’s IT Ministry has proposed amendments to regulate online gaming, potentially covering platforms like Probo. 
  • However, these rules lack enforceability at present, leaving a significant legal gap in the oversight of opinion trading platforms.
     

Opinion Trading Platforms FAQs

Q1. What are opinion trading platforms?

Ans. Platforms where users bet on real-life events with yes/no outcomes for monetary gain.

Q2. Why did SEBI issue a warning?

Ans. Because these platforms aren’t regulated and may operate illegally if trading securities.

Q3. Who are key players in India?

Ans. Probo and MPL Opinio are major platforms offering event-based prediction markets.

Q4. Are these platforms legal in India?

Ans. They operate in a legal grey area and face possible regulatory action.

Q5. How are global markets handling them?

Ans. Countries like the US regulate them under agencies like the CFTC.

Source: IE | IE