Prediction Market Platforms Face Regulatory Challenges Over Gambling Classification
Prediction market platforms Polymarket and Kalshi are facing regulatory challenges, with authorities in Taiwan, France, and Singapore labeling them as unlicensed gambling operations. Key points include:
- Prediction markets allow traders to bet on event outcomes, facilitating price discovery based on differing opinions.
- In the U.S., the Commodities Futures Trading Commission regulates these markets, viewing them as event contracts similar to weather derivatives.
- Polymarket has been forced to block U.S. users following a settlement, while Kalshi secured approval for election-based contracts.
- Kalshi's new advisor, Donald Trump Jr., may strengthen its regulatory position.
- During the 2024 election, prediction markets were pivotal for hedging against political outcomes.
- Polymarket reported $1.6 billion in monthly volume post-election, largely driven by sports-related contracts.
- Significant volumes are noted for events like the NFL Super Bowl ($1.1 billion) and Champions League ($740 million).
Regulatory scrutiny continues as jurisdictions with established online sportsbooks, such as Singapore, may prompt further restrictions. The growing interest in sports-themed contracts indicates potential future applications despite these challenges.