Gaming Ban Pushes India’s Traders Offshore 

The recent notification of rules under the Promotion and Regulation of Online Gaming Act has paved the way for operationalising India’s regulatory framework for its rapidly growing online gaming sector. The establishment of the Online Gaming Authority of India under MeitY as a unified sectoral regulator brings e-sports, educational games, and social gaming—designed as competitive events between individuals or teams—within the regulatory fold. Provisions establish registration, user safety, grievance redressal, and transparency obligations for online game service providers.

Prohibition of Real Money Games
The PROG Act explicitly restricts online money gaming (real money games), whether offered as games of skills or games of chance.
In April 2025, SEBI cautioned investors against dealing on ‘Opinion Trading Platforms’, stressing that arrangements with payouts tied to binary outcomes of an event do not qualify as securities. Earlier, SEBI had cautioned against unauthorised virtual trading and gaming platforms offering paper trading or fantasy games based on listed companies’ stock price data. Following the PROG Act’s ban on real money games, many opinion trading platforms voluntarily suspended operations or shut down entirely. 

Surge of Offshore Prediction Markets
Recent reports show overseas prediction markets like Kalshi and Polymarket are attracting a large number of Indian users, despite existing regulatory restrictions. This surge is driven by speculative traders across a diverse range of event contracts, including sports, politics, weather, geopolitics, macroeconomic indicators, financial data, corporate earnings, and other identifiable public events. The simple binary (all-or-nothing) payoff structures of contracts suit the interests of Indian retail traders, driving their participation. The ongoing IPL 2026 tournament and state assembly elections have reportedly drawn bets on global platforms amounting to millions of dollars. 

Multi-jurisdictional regulatory gaps undermine Indian regulator’s supervisory control, as these platforms enable trading without identity verification and bypass banking channels through cryptocurrency payments. Meanwhile, MeitY is considering blocking websites and restricting VPN access to banned offshore prediction market platforms to prevent local users from participating in real money games. 

Mixed Signals from Global Markets
Most advanced countries—including the EU, the UK, Australia and Singapore—treat prediction markets or event contracts as gambling products, regulating or prohibiting them under existing gambling laws. Barring FCA-regulated spread betting classified as derivatives in the UK, prediction markets in these jurisdictions do not qualify as permissible financial instruments. Unlike other jurisdictions, US regulation classifies event contracts as swaps or swap-like derivatives under the Commodity Exchange Act, overseen exclusively by the Commodity Futures Trading Commission . New entrants like Polymarket or Kalshi operate as regulated Designated Contract Markets within this framework. 

With a supportive regulatory regime, leading US derivatives exchanges like CME Group and Intercontinental Exchange (ICE) are expanding events-trading product portfolios directly or through strategic partnerships. Recently, ICE made a strategic investment in Polymarket, while CME group expanded offerings to retail traders with simplified event contracts on financial and economic benchmarks, as well as sports, through partnered FanDuel Prediction Markets.

Regulatory Dilemma on Foundational Contours
As prediction markets emerge as a new asset class with strong growth potential, their blurred boundaries between outcome-based financial contracts and gambling-like event wagers place regulators in an acute dilemma. Without going into the merits of this product construct—falling somewhere between financial hedging and speculative trading—regulators have largely dismissed product innovation considerations. 

So, the answer to whether event contracts can be qualified as financial products lies in testing following foundational measures of a financial market construct:

Price Discovery: Harnesses collective wisdom by aggregating dispersed implied probabilities to forecast events with high-frequency, continuously updated, market-driven probability estimates.

Risk Reduction: Hedging tools that complement traditional derivatives for unpredictable events like weather, catastrophes, supply-chain disruptions, defaults, claims, macro indicators, policy decisions, and regulatory actions.

Market Integrity: Dubious practices—including insider trading, manipulation and traders with confidential information access—distort price discovery, undermining credibility and fairness.

Trust: Platforms evoke low trust due to weak operator authority, conflicts of interest, opaque rules, immature product design, poor governance and missing market surveillance monitoring.

Transparency: Rumour dominance, narrative influence, and insider trading degrade the quality of market information, compromising transparency and legitimacy of price signals.

Investor Participation: With product simplicity and low entry thresholds, platforms promote speculative trading over long-term investing, especially among retail participants.

Coevolution of Regulatory Oversight
Bringing hidden, unregulated markets into the systemic architecture demands a pragmatic approach to regulatory oversight to safeguard stability of financial systems. A nuanced regulatory evaluation, supported by enabling legal and operational frameworks, can prevent reducing investor protection and product innovation to a binary choice.. It is time regulators adopt a discerning stance, fostering co-evolution of oversight mechanisms that enable financial product innovation within robust safeguards, ensuring trust and resilience in financial markets.