Mumbai, April 30 Capital markets regulator Securities and Exchange Board of India (SEBI) has issued a strong warning to the public against using opinion trading platforms, saying these platforms operate outside its regulatory oversight and offer no protection to investors under securities laws.
In an advisory, SEBI said that some online platforms, referred to as ‘opinion trading platforms’, allow users to trade on the outcomes of yes-or-no events.
The payout depends on whether a certain event happens or not. For example, users may place trades on whether a sports team will win, or if a particular political decision will be taken.
These platforms often use financial terms like ‘profits’, ‘stop loss’ and ‘trading’, giving the impression that they are legitimate investment platforms, SEBI added.
"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," the market regulator stated.
However, SEBI clarified that opinion trading does not fall under its regulatory framework, because what is being traded is not considered a security under Indian laws.
As a result, users of such platforms cannot avail any investor protection or legal safeguards that apply to regulated securities markets.
"Investors/participants should be aware that no investor protection mechanism under securities market purview shall be available for such investment/participation," the regulator added in the advisory.
SEBI also said that these platforms are not recognised stock exchanges and are not registered or regulated by the market watchdog.
If any of the opinions being traded fall under the definition of a security, such trading will be illegal, and strict action may be taken against the platforms involved.
Recognised stock exchanges have also been directed to take appropriate action if they come across such violations.
The warning aims to make the public aware that SEBI does not regulate these platforms, and any investment made on them is completely at the investor's own risk.
SEBI pointed out that despite some platforms claiming to promote skill-based engagement, opinion trading is more like gambling. This is because of its unpredictable outcomes and binary decision-making nature.
The regulator urged investors to stay cautious and not get misled by financial-sounding language or the promise of quick returns on such platforms.
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