The case to regulate opinion trading in India 

market

By Abhishek Kumar 

We all have opinions which may be derived out of knowledge, our personal point of view or hearsay. But what happens when our opinion on real-world events like election outcomes or tomorrow’s weather becomes a tradeable and monetizeable asset? This is the USP behind opinion trading platforms that allow users to wager/ place trades on real-world events such as elections, stock market movements, weather, crypto and economic trends with monetary stakes.

Users of opinion trading platforms can typically browse a wide category of events, such as sports or politics, and wager money on a binary outcome by selecting “YES” or “NO”. Therefore, opinions can only be expressed in an ‘all-or-nothing’ fashion and are accompanied by real money stakes.

Thriving in a grey area 

With venture capital investments and exponential growth in the last 2 years, opinion trading has gained such rapid traction, with over five crore Indian users and estimated annual trading volumes exceeding Rs 50,000 crore.

These platforms raise a host of concerns, particularly since betting, gambling and wagering are considered “games of chance” and are expressly prohibited by Indian laws. For instance, wagers on outcomes with monetary stakes around real world events violate Rule 4A(3) of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. Games of skill, on the other hand, are wholly legal and are allowed under the Public Gambling Act, 1867 (PGA), several state legislations, and the Supreme Court of India.

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. Real world events like elections or cricket matches are influenced by numerous uncontrollable factors, such as weather, voter turnout, or last-minute strategies and can lean on chance heavily. As a result, the feature of binary ‘Yes/No’ choice in decision-making can strip away the complexity of analysis, making outcomes akin to flipping a coin or chance.

These platforms are also heavily advertised, often in popular media by the likes of influencers and celebrities. Given opinion trading’s questionable legality, this creates potential for serious consumer harm. Advertisements promoting betting and gambling are already prohibited by the Central Consumer Protection Authority (CCPA). The Ministry of Information and Broadcasting (MIB) has also issued repeated and frequent advisories in this regard and even the code of Advertising Standards Council of India (ASCI) strongly discourages such advertisements. Yet the ads continue unabated!

The folly of opinion trading platforms does not end there, much to the detriment of Indian consumers. These platforms also position themselves as trading platforms by mimicking instruments like ‘Contract for Difference’ (CFD). A CFD stipulates that a buyer will pay the seller the difference between the current value of the asset and its value at the beginning of the contract. Users of opinion trading platforms "trade" their position on the likelihood of an event occurring, with a payout dependent on the result and settled in a similar way as CFD.

Unfortunately, some of these platforms are also misleading Indian consumers by claiming legal status under India’s financial markets. Exaggerated claims such as these can distort the consumer’s decision making and significantly hinder their right to act in self- interest. The platforms also portray themselves as investment platforms but without the necessary licenses from regulators such as SEBI and investment protection measures. Notably, the platforms also do not institute basic guardrails, such as age-gating, necessary to protect minors from accessing such monetary activities.

Regulating the unregulated 

In light of such significant potential for consumer harms, it is vital that India regulate the opinion trading sector in line with global best practices, within India’s legal framework. For instance, in the US, UK, and Australia, opinion trading is regulated by the countries’ stock market regulator since these jurisdictions view it as being like the trade of securities and commodities. The Indian opinion trading industry can, potentially, be overseen by SEBI.

Regulation for these platforms must also adequately address socio-economic and societal risks such as financial losses, debt cycles and addiction. Any regulatory intervention must acknowledge that vulnerability to financial risk is exacerbated by the new relative ease of digital payments and the stigma many experiences when reporting financial fraud.

A battery of institutions like SEBI, the Ministry of Finance, CCPA, MIB, and ASCI must consider formulating necessary regulations on opinion trading and issue instructions in the interim so consumer and societal harm can be mitigated. In doing so, regulators must also consider the possibilities of opinion trading influencing even some real-world events.

This rapidly growing new-age sector cannot remain unregulated or operate under the radar for long, especially considering the potential for consumer risks and risks posed to India’s financial markets. It is critical that India’s financial regulators in particular take immediate cognisance of such trade and trading platforms to overcome existing pitfalls and protect the financial interests of both users and the government.

(Abhishek Kumar is Convenor, New Indian Consumer Initiative. Inputs to this article reflect a joint sentiment of consumer organisations from more than five states.)

Views are personal and do not represent the stand of this publication.