SEBI Warning Against Trading Platform: India’s markets regulator, the Securities and Exchange Board of India (SEBI), has cautioned investors against dealing with ‘opinion trading platforms,’ a new segment in the country’s burgeoning online real money gaming and betting market, which allows users to win money by placing bets on the likelihood of a real-life event taking place.
So far, such platforms – which are regulated in countries like the United States – largely went under the regulatory radar in India, but government agencies now appear to be turning their attention towards the sector. And that’s for good reason: the industry has so far raised more than Rs 4,200 crore in funding from over 35 investors which include Sequoia Capital (PeakXV), Elevation Capital, Accel Partners, Soma Capital and Y Combinator.
As per industry estimates, these platforms have registered transaction volumes of over Rs 50,000 crore a year with a user base of more than 5 crore people. Collective revenues for firms in the sector are projected to be over Rs 1,000 crore for the financial year 2024-25.
What are opinion trading platforms?
Opinion trading platforms provide their users or participants a platform to trade or enter into arrangements wherein the payout is dependent on the outcome of a yes/no proposition of happening or not happening of the underlying event.
In some cases, opinion trading platforms are designed in a manner so as to resemble an investment platform as they use terminologies such as profits, stop loss, trading etc., terms closely associated with trades in securities.
The sector in India has companies like Gurugram-based Probo and MPL Opinio. While the former offers questions on a varied set of sectors like sports, elections and cryptocurrency, the latter only deals with questions related to cricket matches.
How do opinion trading platforms operate?
These platforms allow participants to earn money by investing in their predictions on any sports, political, weather, or crypto events. Participants can bet on any event based on their predictions. If the predictions are correct, a participant makes money, and in case the prediction goes wrong they lose.
For example, in a particular state election, an opinion trading platform will give the following option to its participants to bet on –
“Will political party X win the election by a margin of N?” The answer will be yes or no.
If a participant’s prediction comes out to be correct, they will win the money; and if it is wrong, they lose.
Other question themes revolve around the outcome of live cricket matches and other sporting events, how an athlete is going to perform and if they will score a certain number of runs or score a set number of goals, and whether cryptocurrency like Bitcoin will touch a particular figure, among others.
What are SEBI’s concerns?
The markets regulator said that in general, opinion trading does not fall within regulatory purview of SEBI, as what is traded is not security.
“Since none of the platforms providing opinion trading can qualify to be recognised stock exchange, and are neither registered or regulated by SEBI, any trading of securities on them is illegal (in case some of the opinions traded qualify as security),” it said.
The regulator warned investors or participants that no investor protection mechanism under securities market purview will be available if they invest through such opinion trading platforms.
Such platforms are liable to face action for violation in that case, SEBI said. It also advised recognized stock exchanges to initiate appropriate action for violations.
The opinion trading sector is regulated across countries like the US, UK and Australia. In the US, Kalshi, the company that started the opinions trading segment – and from which Probo gets a lot of its inspiration from – is regulated by the Commodity Futures Trading Commission (CFTC), one the country’s two main stock market regulators.
Although, it is worth noting that a similar prediction app called Polymarket has come under the scrutiny of the US Department of Justice allegedly accepting trades from US-based users. The company is not registered with the CFTC and as a result, can not legally allow US-based users to wager on the platform.
India’s IT Ministry had come up with amendments to Information Technology Rules to regulate online gaming platforms, which could have had a bearing on firms like Probo. However, there is a question mark on the status of these rules. For now, these laws have no regulatory teeth, which furthers the problem of the legal lacunae that exists around online gaming in general, and opinion trading platforms in particular.
So far, such platforms – which are regulated in countries like the United States – largely went under the regulatory radar in India, but government agencies now appear to be turning their attention towards the sector. (Representational Image) 
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