Many have now found an easy way out – binary options, or off-exchange opinion trading. These are nothing short of hardcore alternatives to spread bets. Money is to be made on a simple ‘yes-no’ binary question. Will Sunrisers Hyderabad trounce KKR on Thursday? Will there be a new GST slab by end-May? They offer all-or-nothing payouts based on the outcome of that single event.
These internet badlands are still uncharted, unregulated territory in India. Seduced by promises of instant income, some 50 mn Indians are, according to National Initiative of Consumer Interests, already wagering their fortunes with transaction run rates exceeding ₹50,000 cr annually on such online opinion trading platforms that have mushroomed. Many are backed by top-tier VCs and successful angels.
IPL season has always been a bonanza for betters. With opinion trading platforms, they are now fast getting legitimised. Distinction between investment instruments and gambling has got blurry. But even then, outcomes of a sporting or political event, or even a human tragedy, backed by ‘bhaos’/odds looks less skill, more high-risk speculation.
With trading volumes skyrocketing, what can stop nuggets of information being turned into tools that manipulate prices of stocks and other financial assets? Who can guarantee it won’t spike IPL into a cesspool of spot or match fixings?
Take these three binaries: Will Tesla Model 3 be cheaper than Honda City in India? Will bitcoin prices be 81,922.30 USDT or higher at 12.30 PM on March 31 on Binance?
Will CPI for F&B for ‘Urban’ group be more than 202 for March?
Other than the first question, the other two are real. Unlike fantasy leagues, one can also trade out the moment they are in the money. A handful even operate on a ‘house versus player’ template, much like a casino, where the platform becomes ‘house’ and the user becomes ‘player’. The platform sets the odds and takes bets, making money when a player loses, even earning a handsome commission.
With the scourge blending into shape-shifting offshore brokers and websites, financial regulators worldwide are swiftly setting guard rails, or banning them outright, wary of the danger to unsuspecting retail investors. In the US, where popular crypto-based prediction marketplace Polymarket drew more than $2 bn in trading volume last year with its fast-changing odds ahead of the presidential elections, binary events platforms are considered financial derivatives registered under the Commodity Exchange Act.
Recall the story around the mysterious online trader ‘Trump whale’, who reportedly made around $48 mn in profit betting on Trump achieving a decisive victory in the 2024 presidential election after he commissioned his own ‘neighbour polls’ to assist his decision-making. But ‘know-thy-neighbour’ before going out to vote has serious pitfalls. A week after the polls, the phone of Polymarket’s founder was confiscated by federal agents.
Indian knockoffs are predominantly based on the Polymarket phenomenon, even if Singapore and Taiwan disallowed it. The EU wisely has barred retail participation from buying and selling such options. Indian policies for digital platforms and online real-money gaming are still fragmented. Efforts to self-regulate have only intensified the scrutiny of taxmen and haemorrhage of the industry. No comprehensive regulation exists for such opinion-based punts. It should, thus, be Sebi’s immediate remit to intervene and probe if these financial contracts are contravening any securities law.
Bans never work, and with servers remaining overseas, users find a way around. Instead, let a true marketplace with market markers give way to transparent transactions, a potential source of sarkari revenue collection. Even stock indices, arguably, reflect wisdom of the collective. But forecasting levels of CPI using a binary question hardly leads to adding value to the repository of market wisdom. These platforms only generate impulsive human behaviour. More importantly, is this the best use of capital in a society that doesn’t have capital?
Roll out the rulebook, before these binary boys show their hands. And keep winning in their online poker rooms.
