Sebi Urges Investors To Exercise Caution While Dealing With Opinion Trading Platforms

Opinion Trading In India: The Securities and Exchange Board of India (Sebi) has raised concerns regarding opinion trading platforms which mimic investment platforms and use terms that are closely linked to actual trading activity in securities, such as loss, stop loss and profits.

Notably, opinion trading platforms or applications provide users a way of placing bets on binary outcomes. Some common examples include placing yes/no bets on sporting and political events, or the securities market. Betting on such apps or platforms involves making predictions using chance, rather than skill.

The market regulator cautioned investors to note that opinion trading does not fall within its regulatory purview, since the activity which takes place on such platforms does not actually involve the sale and purchase of securities. Given that such platforms are not within Sebi’s purview, the regulator advised investors that it cannot offer any investor protection measures for participation in such activities.

“...investors are advised to note that in general, opinion trading does not fall within regulatory purview of SEBI, 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,” Sebi said.

The market regulator added that none of the opinion trading platforms which are currently operational can qualify to be recognised as stock exchanges, and are neither registered nor regulated by Sebi. 

The market regulator said that in case any trading of securities is conducted on opinion trading platforms, it will be considered illegal. It said that opinion platforms which provide such options will then face legal action for violations.

Sebi also urged recognised stock exchanges to begin taking appropriate action against opinion trading platforms for such violations. Consumer awareness platforms, such as the National Initiative for Consumer Interest (NICI) have also highlighted concerns regarding the growing popularity of opinion trading platforms.

According to NICI data, opinion trading platforms have nearly 50 million users, and transactions exceeding Rs 50,000 crore are conducted annually on such platforms. The rise in the prevalence of such platforms has come on the back of advertisements which make claims regarding exaggerated winnings.

The market regulator further said that the purpose of the release is to raise awareness regarding the role of Sebi with respect to opinion trading platforms.