Key highlights:
- The UK’s FCA is reportedly discussing reversing its 2019 retail binary options ban, pressured by Kalshi and Polymarket’s growth and British consumers migrating to unregulated overseas platforms
- Global prediction market volume is projected at $240B in 2026, potentially hitting $1T by 2030, with Robinhood, DraftKings, and Coinbase all entering the space
- Regulatory uncertainty persists on both sides as the U.S. faces a potential Supreme Court battle over CFTC vs. state gambling jurisdiction, while the UK ban stays until the FCA formally acts
The UK’s Financial Conduct Authority (FCA) is reportedly considering whether to loosen its seven-year-old restriction on retail prediction markets.
The FCA introduced its permanent ban on the sale, marketing, and distribution of binary options to retail consumers in April 2019.
Prediction contracts linked to financial events can fall within that framework because they generally involve an all-or-nothing outcome.
At the time, the regulator said binary options presented significant risks of rapid losses and raised concerns about the conduct of firms selling them.
Notably, the rapid growth of platforms such as Kalshi and Polymarket puts renewed pressure on regulators to reconsider how these products should be treated.
UK prediction markets face potential rule change as FCA holds talks
According to The Times, the UK Financial Conduct Authority (FCA) has held discussions with prediction market companies and other stakeholders about potentially changing its approach to contracts that allow users to trade on the outcomes of real-world events.
The reported talks come as more British consumers turn to overseas platforms, adding pressure to the regulator’s debate over consumer protection, financial innovation, and access to speculative products.
Prediction markets allow users to take positions on whether a specific event will occur. If the outcome matches their position, the contract pays according to its terms; otherwise, it can expire without a payout.
The model has expanded beyond traditional financial markets to cover elections, sports, cryptocurrency prices, economic data, and other events.
Industry participants have reportedly argued that the UK’s restrictions are pushing some consumers toward platforms based outside the country.
Users can also attempt to circumvent geographical restrictions through virtual private networks (VPNs), potentially leaving them with fewer domestic consumer protections.
Stakeholders have therefore urged the FCA to consider whether a regulated UK framework could provide greater safeguards while allowing consumers to access prediction markets through authorized platforms.
The discussions also form part of the FCA’s broader review of speculative investments.
Previous consultations have explored whether access to certain products should be based more heavily on their individual risks rather than their regulatory classification.
However, the reported talks do not mean the UK’s restrictions have been lifted. Financial prediction contracts remain subject to existing rules for British retail customers unless the FCA formally changes its regulatory approach.
Prediction markets are booming, but can regulation keep up?
The timing is significant because prediction markets have become one of the fastest-growing areas of digital finance in the United States.
Bernstein Research estimates that prediction market trading volume could reach $240 billion in 2026, up sharply from the $51 billion recorded in 2025, with annual volume potentially reaching $1 trillion by 2030.
Kalshi and Polymarket have emerged as the sector’s two biggest names, attracting major investment and growing interest from financial, cryptocurrency, and betting companies.
Robinhood, DraftKings, and Coinbase have also entered the market, with prediction trading becoming one of Robinhood’s fastest-growing businesses.
Sports currently account for more than 60% of prediction market activity, according to Bernstein, although the sector is expected to expand into economic, political, and business-related contracts.
Institutional participation and corporate demand for event-based hedging could also become increasingly important as the market matures.
That rapid growth has intensified regulatory disputes in the U.S., where authorities remain divided over whether prediction contracts should primarily be treated as financial derivatives under the Commodity Futures Trading Commission (CFTC) or as gambling products subject to state laws.
The dispute has led to multiple court battles involving Kalshi, and many states, including Michigan and Nevada, have challenged its sports contracts, arguing that they amount to sports betting.
Meanwhile, Kalshi and the CFTC maintain that the contracts are financial derivatives under federal jurisdiction.
Conflicting appeals court decisions have added to the uncertainty and could eventually send the issue to the Supreme Court.
Market integrity has also come under scrutiny, with regulators investigating traders accused of using information linked to government activities.
