According to reports, the UK's Financial Conduct Authority (FCA) has contacted companies operating in prediction markets as part of discussions on potentially easing a ban that has been in place for retail investors since 2019.
According to a report published by The Times on Friday, the FCA is considering lifting the ban for UK-based retail investors on using prediction market platforms such as Polymarket and Kalshi. Since prediction markets offer binary options contracts on events including sports, politics, and weather, they fall under a ban introduced by the FCA in April 2019, which meant companies were "prohibited from selling, marketing or distributing binary options to retail consumers."
"Binary options are gambling products dressed up as financial instruments," said Christopher Woolard, the FCA's executive director of strategy and competition at the time the ban was introduced.
According to The Times report, many UK-based retail investors have used virtual private networks (VPNs) to circumvent the country's restrictions on prediction markets and trade on Kalshi and Polymarket, both of which operate in the US. In April, Bernstein Research suggested the total trading volume in the prediction market could grow to approximately $240 billion by 2026 and $1 trillion by 2030.
If the FCA lifts the 2019 ban, prediction market platforms such as Kalshi and Polymarket could face challenges similar to those they face in the US: state gambling authorities are filing lawsuits against the companies over contracts on sporting events. Last week, officials from New Jersey petitioned the Supreme Court to hear their case against Kalshi, which could potentially lead to a clarification of state and federal authority over prediction markets.
Related: Kalshi Bans Republican Politician for Life Over Insider Trading, a First
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