'Platform wins when traders lose': Zerodha's Nithin Kamath warns crypto players exploiting ambiguity
The first risk with unregulated platforms is, of course, that there's nothing you can do if something goes wrong, says Kamath
- Nov 26, 2025,
- Updated Nov 26, 2025 4:15 PM IST
Nithin Kamath, founder and CEO of Zerodha, raised concerns on Wednesday about the growing risks surrounding crypto derivatives, describing them as being in a state of "regulatory limbo." He pointed out that these platforms, which facilitate the trading of cryptocurrency-based futures and options, exist in a grey area where they are neither fully regulated nor completely unregulated.
"Crypto derivative exchanges exist in regulatory limbo," Kamath wrote on X. "A bit like Schrödinger's cat—neither fully regulated nor unregulated. This ambiguity is being exploited in dangerous ways."
He said he was not referring to the actual buying and selling of cryptocurrency. "The first risk with unregulated platforms is, of course, that there's nothing you can do if something goes wrong," he said. "The other big problem with crypto F&O (futures and options) is that you have no idea who’s on the other side of your order."
Kamath explained that in many cases, the platform itself can act as the counterparty to all trades, like dabba trading or CFDs, distorting the incentives. "If the platform is the house, the incentives are distorted. It's good for the platform if the customer loses money because every customer win is the platform's loss," he added.
Adding fuel to the fire, Kamath highlighted that many of these platforms offer extremely high leverage-ranging from 100x to 200x-which could quickly lead to financial ruin. "At that level, even a small move is enough to make you go bust," he warned. Considering the volatile nature of cryptocurrency, he believes that such scenarios are almost "guaranteed."
Kamath also noted the lack of regulatory clarity around crypto derivatives, emphasising that this ambiguity is not just risky for individual traders but also problematic for the broader financial ecosystem. "The lack of regulatory clarity on crypto derivatives is not a good thing in the long run for anyone and has to be fixed," he said.
So far, India does not have any law to regulate cryptocurrency. In September this year, Reuters, citing a government document, reported that India is not keen to introduce a dedicated cryptocurrency law, and instead plans to maintain limited oversight of the sector.
According to the Reserve Bank of India (RBI), managing the risks associated with digital assets through formal regulation would be challenging. Formal regulation, the RBI notes, could grant cryptocurrencies "legitimacy" and potentially make the sector systemic, creating larger risks in the financial system.
The government document also reportedly acknowledges that while a complete ban on cryptocurrencies might reduce the risks posed by speculative assets, such a move wouldn't stop peer-to-peer transfers or trading on decentralized platforms.
India currently lacks a specific cryptocurrency regulation law, but the government has put in place measures to monitor crypto transactions. Cryptocurrencies like Bitcoin and Ethereum are not legal tender, but neither are they banned, and they can still be bought and traded through crypto exchanges.
As of now, Indian investors are estimated to hold $4.5 billion in cryptocurrencies, with the exposure considered limited and not posing a systemic risk to the country's financial stability, according to Reuters.
Nithin Kamath, founder and CEO of Zerodha, raised concerns on Wednesday about the growing risks surrounding crypto derivatives, describing them as being in a state of "regulatory limbo." He pointed out that these platforms, which facilitate the trading of cryptocurrency-based futures and options, exist in a grey area where they are neither fully regulated nor completely unregulated.
"Crypto derivative exchanges exist in regulatory limbo," Kamath wrote on X. "A bit like Schrödinger's cat—neither fully regulated nor unregulated. This ambiguity is being exploited in dangerous ways."
He said he was not referring to the actual buying and selling of cryptocurrency. "The first risk with unregulated platforms is, of course, that there's nothing you can do if something goes wrong," he said. "The other big problem with crypto F&O (futures and options) is that you have no idea who’s on the other side of your order."
Kamath explained that in many cases, the platform itself can act as the counterparty to all trades, like dabba trading or CFDs, distorting the incentives. "If the platform is the house, the incentives are distorted. It's good for the platform if the customer loses money because every customer win is the platform's loss," he added.
Adding fuel to the fire, Kamath highlighted that many of these platforms offer extremely high leverage-ranging from 100x to 200x-which could quickly lead to financial ruin. "At that level, even a small move is enough to make you go bust," he warned. Considering the volatile nature of cryptocurrency, he believes that such scenarios are almost "guaranteed."
Kamath also noted the lack of regulatory clarity around crypto derivatives, emphasising that this ambiguity is not just risky for individual traders but also problematic for the broader financial ecosystem. "The lack of regulatory clarity on crypto derivatives is not a good thing in the long run for anyone and has to be fixed," he said.
So far, India does not have any law to regulate cryptocurrency. In September this year, Reuters, citing a government document, reported that India is not keen to introduce a dedicated cryptocurrency law, and instead plans to maintain limited oversight of the sector.
According to the Reserve Bank of India (RBI), managing the risks associated with digital assets through formal regulation would be challenging. Formal regulation, the RBI notes, could grant cryptocurrencies "legitimacy" and potentially make the sector systemic, creating larger risks in the financial system.
The government document also reportedly acknowledges that while a complete ban on cryptocurrencies might reduce the risks posed by speculative assets, such a move wouldn't stop peer-to-peer transfers or trading on decentralized platforms.
India currently lacks a specific cryptocurrency regulation law, but the government has put in place measures to monitor crypto transactions. Cryptocurrencies like Bitcoin and Ethereum are not legal tender, but neither are they banned, and they can still be bought and traded through crypto exchanges.
As of now, Indian investors are estimated to hold $4.5 billion in cryptocurrencies, with the exposure considered limited and not posing a systemic risk to the country's financial stability, according to Reuters.