Why in News?

With an estimated 5 crore users and an exponential growth in investment, the opinion trading sector appears to have mostly gone unnoticed and unreviewed in India.

What’s in Today’s Article?

• What is Opinion Trading?
• Legal and Regulatory Challenges of Opinion Trading in India
• Industry Perspective
• Global Experience and Lessons for India
• Way Ahead for Regulating Opinion Trading in India

What is Opinion Trading?

• Opinion trading allows users to bet real money on the outcomes of future events across various sectors, such as sports, elections, and cryptocurrency.
• Popular platforms in India include Probo and MPL Opinio, which have collectively attracted over ₹4,200 crore in funding from major investors like Sequoia Capital and Y Combinator.
  • Apps like MPL Opinio are available on both Google Play Store and Apple’s App Store, while Probo is excluded from Google Play.
  • Advertising on platforms like Google and Meta helps these companies acquire users.
• With over 5 crore users and transaction volumes exceeding ₹50,000 crore annually, the sector is witnessing exponential growth but remains largely unregulated.
• It is projected to generate over ₹1,000 crore in revenues for the financial year 2024-25.
• Despite the regulatory challenges, the industry’s rapid growth highlights its potential as a significant contributor to India’s online gaming economy.

Legal and Regulatory Challenges of Opinion Trading in India:

• Lack of central legislation:
  • India currently lacks a dedicated legal framework to regulate opinion trading platforms, leaving users without adequate protections.
  • Amendments to the Information Technology Rules were proposed to regulate online gaming but remain ambiguous in their enforcement.
  • As a result, platforms operate in a legal gray area with limited oversight.
• Game of skill vs. game of chance:
  • The legal status of opinion trading hinges on whether it is classified as a game of skill or chance. In India, games of skill are generally legal, while games of chance are not.
  • Critics argue that opinion trading resembles betting, as it involves wagering/betting on outcomes without requiring significant skill.
• Avoidance of stock market topics: To minimise regulatory scrutiny, platforms avoid questions related to the Indian stock market, which could invoke the jurisdiction of the Securities and Exchange Board of India (SEBI).

Industry Perspective:

• Probo asserts that its platform involves skill, using internal audits and Supreme Court-defined metrics to determine the "skill score" of its questions.
• According to some legal experts,
  • The absence of a "house" (an entity controlling outcomes) distinguishes opinion trading from traditional betting.
  • These platforms have drawn regulatory scrutiny, such as the Competition Commission of India’s (CCI) investigation into alleged market distortions.

Global Experience and Lessons for India:

• Countries like the US and Australia, classify wagers/bets as securities and regulate them accordingly.
• In the US, platforms like Kalshi are regulated by the Commodity Futures Trading Commission (CFTC).
• However, non-compliance with regulatory standards, as seen with Polymarket, can lead to legal action.

Way Ahead for Regulating Opinion Trading in India:

• The rapid rise of opinion trading platforms underscores the urgent need for a clear regulatory framework.
• Stakeholders, including platform founders and gaming industry representatives, have called for central laws to govern this sector.
• A balanced approach is essential to ensure user protection while fostering innovation and growth in the burgeoning online gaming industry.