Prediction markets are gaining more global acceptance, but not in Australia, where the country’s securities regulator has drawn explicit parallels between the products and betting.
In a blog post last Friday, Sarah Court, Chair of the Australian Securities and Investments Commission (ASIC), made it clear that the regulator “is not currently convinced that prediction markets for retail clients are in the public interest”.
“Prediction market contracts have all the features of a bet,” she said.
Court added that the event contracts offered by prediction market operators often “have nothing to do with investment”, citing sporting results as the prime example.
“These features raise questions about whether prediction market contracts are appropriately described as investment products,” she continued.
Australia a no-go zone for prediction markets
The ASIC Chair’s comments get to the heart of the defining regulatory dilemma around prediction markets – are they a form of gambling or not? Divides between different corporations and regulators are sharply drawn on this.
In the US, the biggest jurisdiction for prediction markets, the federal Commodity Futures Trading Commission (CFTC) has firmly put itself behind prediction markets operators like Kalshi, Polymarket, Crypto.com and Robinhood.
Regulators and governments in different states, however, oppose them, with Arizona and Utah having filed criminal charges against Kalshi, the world’s biggest prediction markets platform with a valuation of over $40bn.
Further afield, some jurisdictions have begun differentiating between prediction markets and gambling. Gibraltar was the first to do so, with smaller jurisdictions like Tobique in Canada and Nevis in the Caribbean following suit.
In the larger markets of Europe, the situation remains frosty toward predictions, with gambling regulators from France, the Netherlands, Portugal, and others voicing opposition to the products.
This has not stopped the big players from trying their luck, however.
Polymarket, which is chasing a $21bn valuation, has reportedly been engaging with the UK’s Financial Conduct Authority (FCA) and the EU’s European Securities and Markets Authority (ESMA) to encourage greater acceptance of prediction markets in Europe.
On the other side of the world, Australia seems to be off-limits for prediction markets for the foreseeable future. As Kalshi and Polymarket have no interest in being overseen by gambling regulators, they need to win over securities commissions like ASIC.
Court added that ASIC sees prediction markets as posing market integrity risks, including the potential for misuse of confidential information, market manipulation, and disputes about how event outcomes are determined.
“Australians who choose to access offshore prediction markets directly online should be aware that they do not have protections under Australian law,” she said.
“Australian financial service licensees that facilitate access to offshore prediction markets should be aware that all their licence obligations under Australian law continue to apply to them in this activity.”
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