UK Weighs Legalizing US-Style Prediction Markets

The United Kingdom’s 7-year-old ban on prediction markets could be coming to an end, The Times reported Friday (Sept. 4).

Regulators have held discussions with trading platforms about possibly easing the ban, according to the report, which said the move comes as U.K. consumers increasingly use United States prediction sites like Kalshi and Polymarket.

The Financial Conduct Authority has heard arguments for potentially lifting the ban, the report said. The regulator prohibits financial prediction markets for retail investors because they are seen as binary options, a trade on whether an event will or won’t occur.

The ban was instituted in 2019 due to concerns that customers could take on heavy losses using the products and that traders may not recognize the risks involved, the report said.

Industry insiders, however, have been working to get the ban lifted by showing the FCA evidence of millions of U.K. consumers patronizing prediction markets overseas, and cautioning that shifting the business offshore leaves traders exposed to unregulated firms, according to the report.

“It’s like most prohibitions—they are largely ineffective,” one government source said, per the report. “The concerning thing is that regulators who have an obligation to prevent consumer harm are by their actions effectively driving consumers to operators with no regulatory standards at all.”

The FCA declined to comment, according to the report. It directed PYMNTS to its perimeter report, which outlines what the authority does and does not regulate, including what it calls “prediction market products” (PMPs).

“Our current view is that the financial PMPs we have seen are binary options,” the report said. “As such they remain subject to the FCA’s permanent ban on the sale of binary options to retail consumers, which we consider appropriate given the speculative, gambling-like nature of these contracts and the high risk of consumer harm.”

Prediction markets that wanted to offer financial as well as political wagers in the U.K. would face a few obstacles, The Times reported. First, they would need an end to the binary option ban from the FCA. They would also need a gambling license to offer bets on political events, such as the outcome of the U.S. midterm elections.

Meanwhile, 20 U.S. states are involved in litigation around prediction markets, and 44 signed a letter criticizing them.