Sebi cautions investors against dealing with 'opinion trading platforms'

Sebi cautions investors against dealing with 'opinion trading platforms'

Markets regulator Sebi on April 29 cautioned the public against engaging with opinion trading platforms, warning that such entities fall outside the ambit of its regulatory oversight and offer no investor protection under the securities law framework.

In a public advisory, Sebi said, "Some platforms known as 'Opinion Trading platforms' provide their users/participants a platform to trade/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, Sebi added.

Further, the markets watchdog advised investors to take note that in general, opinion trading does not fall within regulatory purview of the regulator, as what is traded is not security.

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

The regulator further warned that none of these platforms providing opinion trading can qualify to be recognised stock exchange, and are neither registered or regulated by Sebi, and any trading of securities on them is illegal (in case some of the opinions traded qualify as security).

Sebi said that such platforms are liable to face action for violation in that case. Recognised stock exchanges are advised to initiate appropriate action for such violations, it said.

Even in this case, investor/participants are made aware that none of the investor protection mechanisms will be available as their trades will not be on a recognised stock exchange, it added.

The purpose of the warning is to create awareness about the role of Sebi with respect to opinion trading platforms, the regulator added.

Opinion trading platforms often claim to foster skilful engagement, even though their core mechanics align more with gambling for two primary reasons - unpredictable outcomes and binary decision making.

According to industry estimates, the sector has over 5 crore users and is generating an annual transaction volume of Rs 50,000 crore. The companies in the sector are projected to reach over Rs 1,000 crore in revenue during the current financial year, reported Moneycontrol earlier this year.