Sebi cautions investors on opinion trading platforms

Synopsis

The capital markets regulator said opinion trading does not qualify as a security but in some cases, these platforms resemble an investment platform as they use terminologies such as profits, stop loss, trading, which are terms closely associated with trades in securities.

Mumbai: The Securities and Exchange Board of India (Sebi) has warned investors that opinion trading platforms - online services where individuals place bets or trades based on the outcome of future events - are not recognised or regulated by it and do not fall under its investor protection scheme.

The capital markets regulator said opinion trading does not qualify as a security but in some cases, these platforms resemble an investment platform as they use terminologies such as profits, stop loss, trading, which are terms closely associated with trades in securities.

"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)," said Sebi in a release on Tuesday. "Such platforms are liable to face action for violation in that case."

The regulator asked stock exchanges to initiate appropriate action for such violations.

Probo, MPL Opinio, PlayerzPot, Real11 and Big Cash are among the popular opinion trading platforms in India.

Individuals take bets on such platforms betting on an outcome of a yes or a no proposition. If their prediction is accurate, they get a payout and vice versa.

"Investors/participants should be aware that no investor protection mechanism under securities market purview shall be available for such investment/participation," the regulator said.

Brokers said Sebi's warning follows complaints from the industry over the growing popularity of such platforms because of low entry barriers and absence of regulations.

Globally, opinion trading platforms are allowed but they are regulated. Some states in the US allow a diluted and regulatd verion of opinion trading. In the UK, it is treated gambling platforms.

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