Securities and Exchange Board of India (SEBI) has issued a stern public notice warning investors from joining opinion trading websites, which are beyond the legal purview of securities laws and do not provide any safeguard to investors as per current law.
In a recent long advisory, the regulator of the capital market described how some websites, usually masquerading as genuine financial trading services, enable individuals to bet on binary events, such as whether a political decision will be taken or whether a given sports team will win a match.
What Are Opinion Trading Platforms?
These sites allow individuals to wager based on the outcome of a yes-or-no question. The payout is dependent on the outcome of the event and thus the system is tremendously similar to gambling. SEBI pointed out that while these websites use financial terminology like “profits,” “stop-loss,” and “trading,” these platforms are not legitimate investment websites and cannot be confused with regulated exchanges.
“Such websites generally referred to as ‘Opinion Trading platforms’ offer their customers a platform to trade/enter into agreements where the repayment is based on the resolution of a yes/no question,” SEBI stated.
No Legal Safeguards for Investors
Significantly, SEBI made it clear that these trading operations do not involve securities within the meaning of Indian law. Consequently, they are outside the regime of SEBI. Users involved in these platforms do not qualify for any legal or investor protection facility available in the regulated securities market.
“Investors should be aware that no investor protection mechanism under securities market purview shall be available for such investment,” the advisory warned.
Potential Legal Consequences for Platforms
SEBI further stated that such platforms are not legitimate stock exchanges and have not received any regulatory sanctions. If any platform is discovered to be dealing in products which are securities in nature and have not registered, drastic action will be taken against them in accordance with the law of securities.
SEBI further instructed all the authorized stock exchanges to observe such activities and inform any deviations.
SEBI: Opinion Trading is Closer to Gambling
The regulator clarified that although they are portraying themselves as skill-based platforms, opinion trading is more risky in nature since it carries a binary element and uncertain results. This is closer to betting or gambling, which is beyond the jurisdiction of SEBI.
The advisory also asked the public to be alert and not be deceived by the use of financial-sounding terms or offering easy money.
Key Takeaways for Investors:
- Opinion trading platforms are not regulated by SEBI.
- No legal recourse or investor protection is available.
- These platforms mimic gambling, not legitimate trading.
- Participation is at the user’s own risk.
- Recognized exchanges have been asked to act on violations.
Caution advised amid online speculation
As financial innovation continues to evolve in the digital age, SEBI’s advisory serves as a timely reminder for investors to verify the legitimacy of platforms before engaging. Opinion trading, while presented in the guise of investment, remains unregulated and fraught with risk. Investors are urged to stick to recognized financial platforms and exercise due diligence before putting their money on the line.
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