SEBI circular rings death knell as many stock gaming apps shut down, others rethink business models

Nearly half a dozen startups built around stock gaming are either shutting shop, pausing operations or considering a pivot, a week after Securities and Exchange Board of India (SEBI) ban on such services kicked in.

The ones who have adhered to using dated data are struggling to retain young customers as the “adrenaline” of live gaming and simulation for either leisure or learning fades away.

Trinkerr pauses gaming, Investro discontinues

Among the latest to feel the heat is Accel and Kunal Shah-backed Trinkerr, which paused its gaming product to contemplate the next course of action.

Dream Sports-backed fantasy stock app — Investro —has been discontinued and is taking withdrawal requests.

“The broader implications of these regulations seem aimed at curbing illegal data use, and gamification of the stock market. While we support measures to protect investors, an outright restriction on data utilisation might inadvertently restrict access to valuable educational resources that platforms like ours provide,” Trinkerr co-founder Manvendra Singh told Moneycontrol.

Singh said the team is engaging with the regulator to seek clarification and potentially revisit these constraints.

Trinkerr, which clarified that it has never been a pure-play gaming app (sans rewards or incentives) but focused on educational aspect, has been using data with a five-minute delay. However, with the new mandate to exchanges and intermediaries, the product is rendered ineffective.

"Delayed data, especially with the variability of expiry dates in F&O trading, can lead to confusion and detract from the educational experience by introducing inaccuracies in the market conditions that our users study," he said.

Trinkerr and Investro are not alone in facing distress amid regulatory changes.

SEBI's order

On June 24, SEBI's new norms for exchanges and market intermediaries such as brokerages came into effect, prohibiting them from giving "live" data to third party platforms offering virtual trading, a thrilling fantasy game or an educational course.

“Investor education and awareness activities (which do not involve any monetary incentives for users) – however, can use a delayed data feed (with a 1-day lag),” the regulator said in a circular dated May 22.

SEBI's crackdown on virtual trading and stock gaming apps comes in the wake of heightened interest of retail investors, especially in future and options (F&O) besides fear of a growing parallel space outside its purview.

Sanjam Arora, Partner, Trilegal, said SEBI is concerned about social trading apps potentially bordering on gambling, though some argue they should be seen as skill-based games.

“SEBI is concerned that these apps do not afford users the protections ordinarily available to investors in the securities market. There are also apprehensions that 'gamifying' the trading experience could seed high-risk behaviours among users, which may spill over into trading behaviours in the real world,” she said.

Party over for stock-gaming apps

Unable to make a strong case for stock gaming, many have shut shop in the last two years, including Kalaari-backed Threedots, which closed in 2023. Ztocks, Bysos and Stocktry discontinued after the National Stock Exchange’s first communique in 2022.

“Changes have been ongoing since the past few years now. We foresaw this circular last year itself and pivoted our business model to other markets,” says Shubham Rawal, co-founder and CEO, StockPe, a gamified stock market app.

The Motilal Oswal Financial Services-backed app now offers gaming products around US stock market and crypto.

Others, which had gaming as one of the products, too, are making adjustments.

“StockGro does not use live data or delayed feed and instead uses historical data. The business has always been compliant with the applicable regulations,” a company spokesperson said in response to Moneycontrol’s queries.

Even non-gaming apps that used live data to offer paper trading are in a quandary. Recently, US-based TradingView removed NSE and BSE signals from its paper trading feature.

Working around the grey

SEBI’s caution around the gamification of the stock market is not new.

Offering an experience similar to fantasy sports leagues, these stock-gaming apps allow users to build a virtual portfolio and earn rewards based on their performance.

Live stock price data, sourced from stock exchanges and authorised vendors, is often used to simulate the market experience for users.

Typically, one can procure the APIs of the stock market feed, both live and historical, from the 16 NSE authorised vendors.

Without regulations, some of the vendors had found a “loophole” to provide this data to gaming apps, a founder of a gaming app said on condition of anonymity.

Others continued to scrape live data from platforms like Google.

“The live data was always restricted to brokers and sub-brokers. There has never been a clear regulation around gaming apps or even educational apps for that matter,” the founder said.

In 2016, SEBI had proposed a ban on such market-based simulation games, though it stopped short of that and directed registered brokers to refrain from being associated with such platforms, Arora of Trilegal said.

In 2022, the NSE delivered a crippling blow to multiple fantasy stock-trading apps, asking them to immediately stop using its data for real-money gaming and reserved it for “educational” platforms.

“Stock gaming was never allowed in India since day one. But many continued to take advantage of the grey area as nothing was imposed. The NSE alone couldn’t do much, and hence the SEBI stepped in once and for all,” said Vivek Bajaj, founder at StockEdge.

StockEdge, which claims to be one of the rare platforms with a SEBI licence, said it uses delayed data to offer analytics for its educational courses.

No partaking, tells NSE

NSE has shot out a communique to platforms that avail authorised data, asking them to confirm if they are “currently providing NSE data feed to any third party using it for virtual trading service”.

The email, reviewed by Moneycontrol, questions the sharing of the same data feed with education institutes.

“…In regard to above, we need to incorporate the clause in our existing agreement, if not available — the platform is not, in any form and manner, use or make the data available for use, for any gaming, virtual trading or simulation…,” the email reads.

The hassle continues

Adhering to the new regulations has come with its challenges for some “former gaming-turned-educational” apps as they claim to face difficulty in obtaining permission for the historical data.

“Despite our efforts to liaise with data vendors, the ambiguity in the regulatory instructions has led to challenges in obtaining the necessary permissions to use even this delayed data effectively,” Singh said.

“The vendors are cautious,” said Bajaj and are not willing to give data without thorough checks.

Another founder, requesting anonymity, said the request for data now goes through multiple checks — by vendors and NSE officials — including about the intent of the data, business operations, the kind of products on offer and so on.