The rapid spread of prediction markets across the USA has drawn the attention of several other countries. While the UK has previously opposed companies like Kalshi and Polymarket, its stance might soon shift, according to a recent report by The Times. Despite these promising signs, legalizing prediction markets will be far from simple and could take several years.
UK Prediction Market Legalization Is Far from Certain
The UK’s Financial Conduct Authority (FCA) reportedly consulted with representatives from prediction market operators about whether it could loosen its ban on retail investors, in place since 2019. Despite the ongoing ban, many UK consumers are actively engaging in US prediction markets, using virtual private networks (VPNs) to circumvent restrictions.
Despite these preliminary talks, the FCA is far from lifting its ban on prediction markets. The FCA classifies these products as binary options, which the regulator has described as “gambling products dressed up as financial instruments.” The FCA maintains that such offerings are exceedingly risky to consumers and have inherent integrity issues.
Any attempt to legalize prediction markets must include more than just the FCA. The UK Gambling Commission (UKGC) maintains that it views these products as gambling services rather than financial tools. This stance likely means that even if prediction platforms are allowed, they will likely have to obtain a local gambling license and face similar restrictions.
The UKGC Must Also Agree to Such a Move
If prediction markets eventually make their way into the UK, they might face many of the same issues that companies like Kalshi and Polymarket are navigating in the USA. Sports event contracts have proven especially contentious, drawing the ire of traditional operators. Sportsbooks argue that prediction platforms pay less in taxes and face lower oversight, causing unfair competition.
With these challenges in mind, UK regulators are unlikely to mimic the US Commodity Futures Trading Commission (CFTC) and treat prediction markets as just another financial instrument. This distinction is at the core of the ongoing battle between prediction platforms and individual states, as it remains unclear who exactly is allowed to regulate the sector. This debate may even soon head to the US Supreme Court.
Despite their contentious status in the US, prediction markets could have a place in the UK. If regulators legalize the sector, prediction platforms would likely fall under UKGC regulations, avoiding conflict with other licensed gambling operators. With the US prediction market sector now worth hundreds of billions, this addition could contribute additional tax revenue and meet rising consumer interest.