SEBI Issues Warning on Virtual Stock Games Using Real-Time Data

Explainer Briefly Slides The Securities and Exchange Board of India (SEBI) has issued a warning to investors regarding unauthorised virtual trading and gaming platforms offering stock price-based advice and services. SEBI emphasised that these platforms operate without regulatory approval and violate key investor protection laws. In a circular issued yesterday, SEBI noted , “It has come to the notice of the Securities and Exchange Board of India that some apps/web applications/platforms are offering virtual trading services or paper trading or fantasy games to the public based on stock price data of listed companies.

” SEBI stated that these activities breach the Securities Contract (Regulation) Act, 1956, and the SEBI Act, 1992—laws intended to protect investors. The warning references a previous advisory SEBI issued on August 30, 2016, where it cautioned against leagues, schemes, and competitions related to securities markets, some of which distributed prize money. SEBI reiterated that investors should engage in trading and investment activities only through registered intermediaries.



Unauthorised platforms do not fall under SEBI’s jurisdiction. Additionally, any disputes arising from such unregistered schemes or platforms are unlikely to receive protection or grievance redressal through SEBI’s mechanisms. The circular also highlighted the absence of recourse for investors using unauthorised platforms.

They will be ineligible for protections under SEBI’s jurisdiction, including SEBI’s Complaints Redress System (SCORES), and will lack access to investor grievance mechanisms administered by exchanges or the online dispute resolution platform, Smart ODR. Why is SEBI worried? Though SEBI’s latest warning does not mention specific companies, the markets regulator is concerned that these activities resemble “dabba trading,” an illegal practice using unauthorised channels, reported Outlook Business . In May this year, the regulator had instructed stock exchanges and depositories to stop sharing real-time price data with third-party apps, limiting access for virtual stock games.

This measure aimed to prevent users from developing unrealistic expectations about the equity market or taking risks based on virtual successes, particularly targeting apps that offer financial rewards or gamify real-time stock movements. Moreover, stock exchanges have also issued warnings to entities that use data obtained through scraping from their websites or those of brokers, reported Outlook Business . What is Fantasy Stock Gaming? Investing in stocks can be risky; prices may drop unexpectedly, leading to potential losses and additional costs in fees and taxes.

Fantasy stock gaming apps, however, pose that they are a safer alternative. They simulate stock trading using actual stock data from exchanges like National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), allowing users to predict price movements for a small entry fee. If predictions are correct, users may win rewards like gold coins, luxury items, or cash prizes.

If not, you only lose the entry fee, which is far less than the actual trading costs. SEBI disapproves of these apps using real-time data from regulated exchanges. SEBI argues that these platforms misuse market data to attract users, potentially misleading them to equate virtual success with real trading skill.

Unlike real trading, these apps operate without regulation and do not have to disclose risks. But what about games by BSE and Moneybhai (MoneyControl)? Neither of these games involve real money in their games. SEBI is not opposed to the use of market data for virtual trading itself; the real concern lies in the involvement of real money.

This usage of real money can harm users, as these games profit from heightened user engagement while remaining unregulated by SEBI. Consequently, they have no obligation to inform users about the risks associated with real-money virtual trading. However, its important to note that Moneybhai by MoneyControl is not registered with SEBI either.

This approach mirrors a similar action by the U.S. SEC in 2015 , which restricted the virtual trading platform Stock Battle from using live data without regulatory approval.

This crackdown followed a surge in fantasy trading services designed to let individuals compete for cash prizes with virtual stock portfolios, often attracting users with low entry fees. These companies hoped to gain the same legal status as daily fantasy sports, which are classified as “games of skill”. Previous Warnings by SEBI In May this year, SEBI had issued a circular aimed at preventing the sharing of real-time share prices or price data with online gaming platforms that offer virtual trading or fantasy games.

Many of these platforms used this sensitive information, sometimes providing monetary rewards based on users’ virtual stock portfolios. To address this, SEBI’s Secondary Market Advisory Committee (SMAC) recommended measures to curb unauthorized data use. Under the new guidelines, registered market intermediaries and Market Infrastructure Institutions (MIIs) must ensure that real-time price data is not shared with third parties unless necessary for the securities market’s orderly functioning or regulatory compliance.

Data may be shared with a one-day lag for investor education without incentives. Additionally, SEBI mandated MIIs to enter agreements with any entity they share data with, requiring annual reviews of those entities’ activities. SEBI and the NSE previously expressed concerns about the use of real-time data for online gaming, emphasising that such data is intended only for legitimate trading activities.

In 2016 , SEBI had released a similar advisory, warning investors about entities promoting market-related leagues, schemes, and competitions involving prize money. SEBI had also cautioned against unauthorised online platforms facilitating fundraising, which violated securities laws. Finally, it advised the public not to follow stock tips from unregistered advisers or analysts and to verify an adviser’s registration status on SEBI’s website before engaging in any services.

Previously, SEBI has faced challenges from online games like Raj Kundra’s “Stock Race,” where players predict stock, currency, or commodity price changes every 60 seconds, reported Times of India . Users could join for free but must top up their accounts for play points, with prizes ranging from silver coins to cars after a 30.9% TDS.

Other platforms, like Indian Trading League, also existed, featuring former cricketer Kapil Dev. SEBI had issued advisories warning that these contests are unapproved and operate outside its purview. Kundra’s spokesperson had argued that these games do not require SEBI approval, because they are ‘skill based games’ rather than ‘games of chance’, which do not classify as gambling, reported Times of India .

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