Predictions market shifted from niche to norm but regulators don’t like the odds

The predictions market is classified as an illegal gambling service in Australia, but cryptocurrency has garnered legitimacy over time, and because the predictions market is gaining international popularity, regulators will be kept on their toes to keep up with potential pundits’ demand for access.

Steven Pettigrove is a Partner at Piper Alderman, advising on financial services and fintech.

He says, “Both ASIC and ACMA have taken an interest in prediction markets … ACMA has treated unregulated prediction markets as illegal gambling platforms.”

Polymarket prohibited

On 13 August last year, the Australian Communications and Media Authority (ACMA) determined that Polymarket had offered “a prohibited and unlicensed regulated interactive gambling service” to Australian users in breach of the Interactive Gambling Act 2001 (IGA). After months of investigation into the US market trading site, which operates on cryptocurrency trades, the platform was added to the national list of restricted offshore gambling sites, and internet service providers (ISPs) across Australia have been ordered to block access.

According to the ACMA, Polymarket was allegedly “providing a prohibited interactive gambling service and an unlicensed regulated interactive gambling service that has an Australian customer link in contravention of subsections 15(2A) and 15AA(3) of the IGA.”

The ACMA found that Polymarket offered a wagering service covered by paragraph (a) and/or (b) of the definition of a ‘gambling service’.

No Australian licence has been issued for Polymarket, and “wagering services are ‘regulated interactive gambling services’ as defined at section 8E of the IGA and can only be provided to customers in Australia if the service provider has a licence, allocated by an Australian state or territory.”

As the ACMA explained: “The service was provided to customers physically present in Australia, meeting the requirement of having an ‘Australian-customer link’ (as defined in section 8 of the IGA).”

A formal warning was issued to Polymarket on 2 July 2025.

Pettigrove says, “We haven’t seen any kind of regulated prediction markets enter the Australian market, but I think it’s only a matter of time before that’s the case. These platforms have garnered huge attention in the US market, and Polymarket, in particular, has raised money from the likes of the New York Stock Exchange to expand its operations.”

Just hours prior to the US invasion of Venezuela, it’s been reported that one pundit who bet that the US would capture Nicolas Maduro made US$436,759.61 on the increasingly popular predictions market. Because pundits can maintain anonymity on these platforms, the identity of the individual who placed a US$32,000 bet remains unknown publicly. As reported by TradingView, the account on predictions trading site Polymarket, “Ox31a56e”, is no longer accessible on the platform, despite other accounts being viewable.

Along with the lucrative bet on Maduro’s capture, the same account bet on US forces being in Venezuela by 31 January, “invading Venezuela” by this date, and President Trump invoking “war powers” against Venezuela by 31 January. Each of these predictions were valued anywhere between $1,500 and $273,000, and the bets were placed using blockchain platform Polygon. To date, Polymarket has not responded to media queries on the nature of the account or the possibility of insider trading.

Pettigrove says that consequently, “We’ve seen legislation in the US proposed on insider trading in prediction markets. It’s an interesting space, because how do you set the rules for some of these bets? Ultimately, I think they’re vetted by Polymarket in most cases. As to what the rules are, and how you determine what is, for example, an ‘invasion’ [in the invading Venezuela case], could be 100 shades of grey. That’s a whole other issue.”

If the outcome of any situation is not entirely certain, then it is seemingly open to punting on predicted outcomes, whether that’s in sporting events, corporate outcomes (mergers, or hiring particular CEOs), whether Taylor Swift will release an album within the next month, the outcome of local through to federal elections, military actions, and more. Indeed, a number of Polymarket accounts were betting that the “US strikes Iran by Jan 31, 2026”.

Much like the shares market, traders can typically select a “yes/no” or “more/less” outcome, each outcome valued according to the market’s perceived probability. Predictions, like shares, are priced between $0 and $1 (in stablecoin currency), where the price is determined by the market’s perceived probability (so, $0.50 equates to a 50 per cent chance). Each wagered prediction is a “contract”.

Predictions market trading is peer-to-peer, and platforms such as Kalshi and PredictIt make money by charging fees on each trade. Polymarket, like the other platforms, either solely or wholly depends upon user spending, or lucrative deals with media to provide data. As reported by Bloomberg late last year, Intercontinental Exchange Inc., which operates the New York Stock Exchange, agreed to invest as much as $2 billion in Polymarket owing to user demand for the data to inform their trading strategy.

Regulatory hurdles

According to wealth management company Certuity, the global stock market is valued at over US$100 trillion, “with daily trading volumes in the hundreds of billions of dollars”, whereas the prediction market sector is still emerging from niche to norm. A 2025 report projects the distributed prediction industry to reach $95.5 billion by 2035, with a compound annual growth rate (CAGR) of 46.8 per cent. Certuity reported that one of the major obstacles to the growth of prediction markets is “significant regulatory hurdles” wherever forms of event-based betting are restricted or banned

On 7 January, The Guardian reported that the “online wager platform” Polymarket has stated it will not settle over $10 million dollars’ worth of bets on a US invasion of Venezuela because the capture of the then president, Nicolás Maduro, does not qualify.

Traders placed $10.5m on bets of a US invasion of Venezuela this year, with the majority on a 31 January deadline. The remainder have put money on contracts for the end of March and December. Some traders have bet tens of thousands of dollars on the question.

Despite Australia determining that predictions markets are illegal gambling, the market is gaining legitimacy – thanks to mainstream media – as a measure of probability and public consensus. On 8 January, media reported that Polymarket has partnered with Dow Jones to provide prediction market data to The Wall Street Journal. With a swifter, sometimes more accurate forecast than traditional sources, Forbes has labelled the multibillion dollar phenomenon “The Polymarket Effect”. While polls take days of accumulating responses, journalists take hours to days to confirm information, and market analysts comb over data already received, the predictions market is an immediate bellwether for the economy, culture, commerce, and society. On 26 December, The US news network CNN announced a partnership with the predictions market Kalshi, which also provides data to CNBC. According to media reports on the deal “Under the agreement, Kalshi’s real-time market data will be used inside CNN’s newsroom to support reporting on politics, economics, and major cultural events. CNN staff will have access to Kalshi’s probability data, which reflects how users price future outcomes based on trading activity.”

In November last year, Forbes reported that some yes/no questions drew wagers valued between $10 and $20 million. Last year alone, prediction market trading was valued at over $27.9 billion and—owing to the breadth of concerns users can make predictions on—these markets are not quite as stigmatised as traditional sports gambling. Financial reporter Jason Wingard wrote for Forbes, “this isn’t about gambling. It’s about information. Betting markets turn belief into financial risk, creating a ‘truth signal’ that moves faster than polls, pundits, or official reports.”

Australia’s approach differs to United States

Pettigrove says, “Prediction markets exist in a regulatory grey area. At the moment, ACMA’s view in relation to Polymarket was that what they’re offering was a gambling platform. What you see in the US is that these platforms are being offered under regulated financial services frameworks, the likes of Kalshi and Robinhood, which are offering these platforms as, basically, regulated financial instruments.”

He adds, “The grey area is: where do they exist between a kind of gambling and financial markets? Some of the things that you can bet on, or predict on, in these markets look a little bit more like traditional commodities-type financial products, but others look a lot more like basic sports betting. And I think one of the interesting aspects of these markets is that there is some, arguably, financial utility around the ability to price or hedge outcomes of events like elections, for example.”

In the US, the Commodity Futures Trading Commission (CFTC), oversees the prediction trading market and treats platforms as derivatives exchanges, much as they would treat futures trading on commodities, like oil, grains or Bitcoin. Though bets on the US election won by Trump in 2024 on the Kalshi platform were initially challenged by the CFTC, that ruling was overturned and, as Bloomberg reported in December, “under the Trump administration, the CFTC has backed away from the tough regulatory approach it took toward prediction markets under President Joe Biden.”

The Australian Securities and Investments Commission (ASIC) made a product intervention order banning the issue and distribution of binary options to retail clients from 3 May 2021 after ASIC found that binary options have resulted in and are likely to result in significant detriment to retail clients.

ASIC reviews in 2017 and 2019 found that approximately 80 per cent of retail clients lost money trading binary options. ASIC found that binary options are likely to result in cumulative losses to retail clients over time because of their product characteristics, as detailed in a media release at the time.

ASIC estimated that retail clients’ net losses from trading binary options were around $490 million in 2018. Australian retail clients are estimated to have made net losses of more than $6.7 million in 2019.

Will they ever be allowed here?

While predictions markets could, if they met regulatory requirements, gain a financial license to operate in Australia, Pettigrove explains the obstacles.

“It’s a high-risk area, and there are a number of restrictions on the ability to provide, effectively, derivatives contracts to retail customers. These types of markets can look a little bit like binary options because you’re zero-sum betting ‘yes or no’ on the outcome of an event.”

He adds, “I think that, ultimately, you’ll see these products in Australia, but there’ll be quite significant regulatory compliance around them.”