Why in 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.
What’s in Today’s Article?
- Opinion Trading Platforms
- How Opinion Trading Platforms Operate
- SEBI’s Key Concerns on Opinion Trading Platforms
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 (Commodity Futures Trading Commission) 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.
