In today’s Finshots, we tell you why the Advertising Standards Council of India (ASCI) wants opinion trading platforms to be regulated and why that hasn’t happened yet.

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The Story

In 2024, Kalshi, a New York based prediction market, dragged the US commodities regulator, the CFTC (Commodities Futures Trading Commission), to court.

The reason?

The CFTC had blocked Kalshi from letting people bet on who would control the US Congress — Democrats or Republicans.

Now, if you’re wondering what prediction markets even are, think of them as online platforms where people try to guess the outcome of real-world events. It’s often called opinion trading but also goes by names like binary options or poly markets.

And these platforms cover pretty much everything under the sun — the winner of a cricket match, the number of runs in the first 5 overs, stock market moves, election results or even the weather. You pick a side, stake your money, and wait to see if your prediction comes true.

Let’s say there’s a cricket match between Team A and Team B. You believe Team A will score at least 50 runs in the first five overs. You place a ‘yes’ bet. Someone else, who doesn’t agree, places a ‘no’ bet. You then choose how much you’re willing to pay for that position. Maybe ₹9 and decide how many you want to buy. So if you buy 10 of them, that’s ₹90 at stake.

Also, it’s a peer-to-peer game, which means that for every ‘yes’, there has to be a ‘no’ from another user. The platform just connects the two sides and takes a small cut from the winnings.

Now, coming back to Kalshi’s case, things took an interesting turn. The CFTC actually lost the legal battle, and Kalshi won the right to allow political betting on its platform. The regulator did file an appeal soon after, hoping to reverse the outcome. But then, in a surprising move, it withdrew the appeal altogether after reaching some sort of agreement with Kalshi.

That’s how it is in the US, where regulators are at least stepping in and taking a clear stance.

In India, though, things are a little fuzzier. Prediction markets sit in a legal grey zone, with no official rulebook or dedicated regulator.

In fact, SEBI (Securities and Exchange Board of India), which oversees the stock markets, has already washed its hands of it. Since these trades don’t involve traditional securities, SEBI says it’s not in their court.

So the platforms mostly regulate themselves. And you can imagine that leads to inconsistency, and often, misleading advertisements.

That’s why the Advertising Standards Council of India (ASCI) has now stepped in, calling for some much-needed clarity on how these platforms should be regulated.

And it’s not hard to see why. Nearly 5 crore Indians are using these platforms today. That’s about a quarter of all demat account holders in the country. With numbers like that, it’s clear that this isn’t just some niche internet fad anymore. It’s big.

So the real question is, how is something this popular still flying under the regulatory radar?

Well, at the heart of the issue is how to classify these platforms. Are they financial instruments, or are they just gaming apps based on skill or chance?

That’s the grey area.

Some opinion trading platforms try to look and feel like investment platforms. They throw around words like profits, stop-loss and trading — jargon you’d usually associate with the stock market.

Some even mimic complex financial instruments like Contracts for Difference (CFDs). For context, a CFD is where a buyer pays the seller the difference between the current value of an asset and its earlier value. Basically, a bet on price movement.

In a similar way, users on these platforms take a position on whether an event will happen or not. And if they’re right, they win money. If not, they lose. The payout structure feels eerily similar to a CFD.

All this can make it seem like you’re trading in a regulated financial product. And naturally, many users assume that SEBI is keeping an eye on things. But that’s not true.

So if they’re not financial instruments, the only other bucket they could fall into is games of skill or chance.

But that opens a whole new can of worms.

Under Indian law, games of chance are generally considered gambling, which is either heavily restricted or outright banned in many states. But games of skill are allowed and recognised as legitimate business activities by the courts.

But then, to dodge gambling restrictions, many of these platforms simply call themselves skill-based games. But here’s the catch. There’s no official legal stamp on that claim. It’s just self-declared and legally fragile.

Sure, Indian courts have previously struck down blanket bans on online gaming, especially when the difference between skill and chance wasn’t made clear. But when it comes to prediction markets specifically, there’s still no clear legal precedent.

That’s why, despite operating in a legal grey area, these platforms continue to thrive on VC money and crores in trading volumes — without you, the consumer, having any real recourse if something goes wrong.

So, how can Indian regulators clean up this mess, you ask?

Well, one place to start is by looking at how other countries are dealing with opinion trading platforms.

In the US, for instance, the Securities and Exchange Commission (SEC) calls this kind of activity binary options trading. That’s just a fancy way of saying you place a bet on a simple yes/no outcome. Like whether the price of something will go up or down. If your prediction is right, you win a fixed payout. If not, you get nothing. There’s no buying or selling of any actual asset involved.

The European Union (EU) takes a similar view, classifying it as a financial product.

But the UK sees it differently. There, the Gambling Commission treats opinion trading as just another form of betting.

There are different regulatory approaches across the world too.

In the UK, there are two main regulators. The Gambling Commission handles all kinds of betting, whether it’s sports, politics, or even whether something is true or false. Then there’s the Financial Conduct Authority (FCA), which oversees spread betting — a financial product that lets you bet on how an asset’s price will move.

But in 2019, the FCA banned binary options because they felt it was too risky, prone to fraud, and basically gambling dressed up as finance. They also said these short-term bets were addictive and didn’t protect consumers well.

In the US, as you might’ve guessed, it’s the CFTC that deals with prediction markets. But platforms need to be registered to operate legally. And as for spread betting, that’s outright illegal in the US.

Meanwhile, in the EU, the European Securities and Markets Authority (ESMA) isn’t a fan of binary options either. Back in 2018, it banned them for retail investors and even made it mandatory for platforms to slap risk warnings on other complex financial products like CFDs.

So yeah, if we’re looking for an Indian equivalent of all these regulators, it’s probably SEBI. Sooner or later, courts will need to step in and decide how opinion markets should be classified. And if they’re labelled as financial instruments, then SEBI will have to figure out how to regulate them.

If not, the ball will land in the Ministry of Electronics and Information Technology (MeitY)’s court, since it now oversees online gaming in India.

Until then…

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