UK Signals Possible Shift on Financial Prediction Market Restrictions

The Financial Conduct Authority (FCA) is reportedly exploring whether Britain’s restrictions on financial prediction markets for retail investors should be eased, as more consumers turn to overseas platforms such as Kalshi and Polymarket, The Times reported.

The regulator has held discussions with trading platforms about the possibility of changing its approach, although its official position remains in favor of the current ban.

Prediction markets allow users to buy contracts based on the likelihood of future events occurring. Such markets can cover economic indicators, weather developments, sports and other outcomes.

Under the FCA’s existing rules, contracts tied to financial events and certain weather-related outcomes are classified as binary options. The sale of binary options to retail investors has been prohibited in the U.K. since 2019.

The regulator is now examining whether that restriction should be revisited as British consumers increasingly access prediction markets through overseas providers.

For now, the FCA continues to argue that the ban is justified. Its latest perimeter report cited the speculative nature of these contracts and the potential for consumer losses as reasons for maintaining the restriction.

However, the regulator has left the door open to further analysis of how prediction products should be accessed and where they should sit within Britain’s regulatory framework.

Industry representatives have been urging officials to reconsider the policy. The Times reported that they have provided evidence suggesting millions of U.K. residents are already using foreign prediction platforms.

Some users reportedly bypass geographic blocks through virtual private networks (VPNs), potentially putting themselves outside the consumer safeguards available through regulated U.K. providers.

The review follows an FCA discussion paper focused on retail investment rules. That paper raised the possibility that certain prediction products could fall under the existing prohibition on binary options.

It also questioned whether regulators should assess speculative investments based on the risks they pose instead of relying primarily on how the products are categorized.

Rapid Growth

The regulatory debate comes as prediction markets continue to expand at a rapid pace.

Bernstein expects global prediction-market trading volume to climb from $51 billion in 2025 to $240 billion this year, according to figures cited by The Times.

The leading platforms have also attracted significant investor interest. Kalshi has reportedly reached a valuation of $22 billion, while Polymarket is valued at around $21 billion.

Prediction markets are also moving into the mainstream as major companies enter the sector. Coinbase, Robinhood and DraftKings have each launched prediction-related products.

However, a platform seeking to offer a broad range of contracts to U.K. customers would need to satisfy separate regulatory requirements.

Financial prediction contracts would require the FCA to permit their retail offering. Sports and political contracts would fall under the Gambling Commission, meaning operators would need the appropriate gambling license to offer those markets, according to The Times.

The FCA had not immediately responded to CoinDesk’s request for comment.