UK LEGAL


Prediction markets: gambling, finance or something in between?


Prediction markets have grown from a niche online product into a significant global industry, sitting in something of a grey area between betting and financial products. Northridge Law’s Melanie Ellis reports...


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n a remarkably short timeframe, prediction markets have grown from a niche online product into a significant global industry. In the US, well-known platforms Polymarket and Kalshi have monthly trading volumes in the billions, but the regulatory position of these products in the US and other markets remains uncertain.


WHAT IS A PREDICTION MARKET? In simple terms, a prediction market allows users to speculate on whether an event will or will not occur. Typically, users can “buy” either a “yes” or “no” outcome for the event, with the purchase price


22 JULY 2026


reflecting the likelihood of the event occurring and a fixed payout if their prediction is correct. For example, a user believes Andy Burnham will be the next UK Prime Minister so buys a “yes” outcome at £0.90 and receives the fixed £1 payout if that prediction proves correct, making a profit of £0.10. Often users can trade positions before the event occurs, to generate a profit based on an increase in the likelihood of the event occurring.


A prediction market will often offer markets on a wide range of events, which may include sporting events, political elections, climate outcomes and celebrity events.


HOW ARE THEY CURRENTLY REGULATED?


The difficulty with prediction markets is they sit in something of a grey area between betting and financial products such as futures contracts and insurance. They highlight the degree of crossover between these types of contracts, which ultimately all involve people speculating on whether an event will or will not occur.


Adding to the classification difficulties, prediction markets do not involve the operator itself taking a position on whether events will or will not occur.


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