SEBI has expressed concerns over the potential risks these apps pose, particularly when they involve real-money rewards
The Securities and Exchange Board of India (SEBI) is cracking down on the growing trend of virtual stock gaming apps providing virtual trading services and fantasy games based on the movement of real-time share prices of listed companies. These apps have become increasingly popular due to the surge in retail investors’ interest in the stock market. The market regulator has expressed concerns over the potential risks these apps pose, particularly when they involve real-money rewards.
Why SEBI is banning virtual trading gaming apps?
SEBI is primarily concerned with the resemblance of these activities with “dabba trading,” an illegal practice where orders are placed through unauthorised channels. The regulator has directed stock exchanges and depositories to stop sharing real-time price data with third-party apps. This will effectively cut access to data feed for these virtual stock games.
The move aims to prevent users from potentially developing unrealistic expectations about the equity market or engaging in risky behaviour based on virtual wins. Notably, the action is particularly targeted at apps offering financial rewards or gamifying real-time stock movements.
"Sebi's circular essentially means that it ends all platforms offering trading competition, demo trading, CFDs (contracts for difference), and more," Zerodha co-founder Nithin Kamath said on social media platform X.
Apps utilising historical or delayed data for education or entertainment purposes are expected to remain unaffected. In addition, media agencies providing real-time data feeds will not be impacted.
The fate of virtual stock games in India remains uncertain. Developers will have to modify their apps to comply with SEBI regulations, potentially switching to non-real time data or focusing on educational content over competitive elements.
However, this is not the first time SEBI has taken action on these apps.
In 2016, SEBI was investigating a case related to businessman and former co-owner of Rajasthan Royals Raj Kundra, it found that his company was getting data feeds and engaged in gaming activity based on that.
In the past, SEBI has warned investors that it didn’t approve of such stock market games. Stock exchanges have also warned entities using data scraped from their websites or those of brokers. Despite that several new gaming platforms have been found violating norms.
According to SEBI, market price data can be shared for investor education and awareness activities without offering any kind of monetary reward to the participants. The regulator has asked exchanges to carry out due diligence while sharing such data. SEBI’s action highlights the evolving regulatory landscape surrounding financial apps and gaming.