Prediction markets legality as gambling or derivative trading platforms, & rules

[Emeraldo]

The legality of prediction markets is increasingly being questioned, but as long as they're legal in many countries, they'll continue to be used, even though it's clear to many that there are plenty of insiders. I don't place bets there because I understand my margins will be extremely small or even negative, as I'm not a great expert. But that doesn't mean I should stop trying to improve and gain confidence, to become better than other players. I'm also seeing a trend toward bans on prediction markets in many countries, as well as better regulatory oversight, which could likely benefit the entire ecosystem.

There are so many countries that have banned the prediction market because of the way the operation some of these companies are not licensed in many of the countries they are operating. If the prediction markets are the right thing, we would have not even seeing so many ban from different countries, trying to restrict their operations so their citizens would not use the prediction market.
These companies need to do the right thing so that they will be accepted where they have been banned for more players to patronize them.

[hedgeh0g]

There have been more news that we have been reading about prediction markets like Polymarket and Kashi. News that are about their ban and legalities. It will be good if we discuss this on a single thread instead and which is the purpose of this topic.

These are lists of countries that have banned prediction markets:

Argentina
Belgium
Brazil
Canada
Czech Republic (Czechia)
France
India
Indonesia
New Zealand
Portugal
Spain

Some countries are reviewing if prediction market should be banned or not.
One of the countries is:
South Korea

Know that some of these countries like Indonesia and South Korea banned gambling. Prediction market operators see prediction markets as platforms where derivatives are traded, but some countries see them as gambling sites.

Any country that you know that I have not mentioned that banned prediction markets, you can post about it.

Any news we see about the legality of prediction markets as gambling sites or not, we can post about it on this thread.

I'm surprised, but recently I read information that South Koreans are quite gambling people, because they often submit their notes to the government asking for refunds, because often many traders lose a lot of money on online exchanges, and this is ridiculous because they are very committed to trading with leverage, which is dangerous for absolutely anyone. like a trader, and I think it's right that prediction markets should be banned there, because they should be legal and run in a country where the population is not really gambling, because because of this, the number of problems in the country will grow.

[Julien_Olynpic]

This is a problem with any innovation. As soon as a fundamentally new asset market or a fundamentally new type of gambling or gambling-like activity emerges, regulators in similar industries immediately try to treat the new innovative market as just another type of the previous ones. As for the prediction market, it's a very specific market and a very specific type of activity—something between traditional trading and traditional betting. It also has many similarities with derivatives markets, such as options. Regulators in many countries don't want to thoroughly examine this; they find it easier to resort to prohibitions.

[sompitonov]

This is a problem with any innovation. As soon as a fundamentally new asset market or a fundamentally new type of gambling or gambling-like activity emerges, regulators in similar industries immediately try to treat the new innovative market as just another type of the previous ones. As for the prediction market, it's a very specific market and a very specific type of activity—something between traditional trading and traditional betting. It also has many similarities with derivatives markets, such as options. Regulators in many countries don't want to thoroughly examine this; they find it easier to resort to prohibitions.

But I think you understand that early bans aren't the best solution either, because a complete ban usually encourages players to bet around the ban, leading to a black market and tax evasion, which no one wants. While the regulator's approach is certainly understandable, they need time to figure out how to improve the process so as not to hinder players from betting while simultaneously overseeing it logically and fairly. But what I do know is that it shouldn't be unregulated. And such markets have a lot of insider information, which, as someone who enjoys betting, puts me off.

[xenomorfo]

But I think you understand that early bans aren't the best solution either, because a complete ban usually encourages players to bet around the ban, leading to a black market and tax evasion, which no one wants. While the regulator's approach is certainly understandable, they need time to figure out how to improve the process so as not to hinder players from betting while simultaneously overseeing it logically and fairly. But what I do know is that it shouldn't be unregulated. And such markets have a lot of insider information, which, as someone who enjoys betting, puts me off.

the ban does nothing but fuel the desire to transgress.
a huge discussion was about the word nigger, if it is banned that word takes on power, negative power
banning, censoring, always creates problems... banning alcohol makes drinking alcohol more exciting.

[laspol65]

You seem to have forgotten that there are folks who visit gambling site without even considering the fact that gambling is restricted in Thier country, this online gambling have make things very difficult for the government especially those government that would like to ban gambling in Thier country. It can only work Best for Those that doesn't know how online gambling works which they will  still want to learn if the offline gamble is closed.

Gambling is banned in many countries, especially in Muslim countries, but still people in those countries are gambling in different ways. Those who have devoted themselves to online games will not be able to stay away from online games, but they can enter the game of gambling by following any strategy.
But the governments of countries that are trying to ban gambling, even if they succeed in the literal sense, they will not be able to completely deprive the people of gambling. Those who are more attracted to and find pleasure in online gambling will associate themselves under different networks.

[Oshosondy]

Morning Minute: Trump To Meet Crypto, Prediction Market CEOs This Week

I do not know if I should bring this m, but I think it is worth it. Trump wants to meet crypto and prediction market CEOs and it will be this  week.

https://finance.yahoo.com/markets/crypto/articles/morning-minute-trump-meet-crypto-130317331.html

I think he may be meeting prediction market CEOs and discuss about what is going on in the country on states issues with the prediction markets.

But the governments of countries that are trying to ban gambling, even if they succeed in the literal sense, they will not be able to completely deprive the people of gambling. Those who are more attracted to and find pleasure in online gambling will associate themselves under different networks.

Do not even see it surprising that countries that banned gambling are among the lists of countries that gamble the most. If you think I am not correct, you can make findings about it. I am not referring to Muslims countries, but referring all countries that bannned gambling.

[acroman08]

I think he may be meeting prediction market CEOs and discuss about what is going on in the country on states issues with the prediction markets.

I can't help but feel that after this meeting, Trump will do something that would heavily benefit prediction markets.

It is not a total restriction.

Contracts tied to sports, elections, politics, entertainment, culture, tech and science are barred while others are allowed. People that are interested in commodities, climate, economics and finance can still make use if the prediction market.

Yep, it's not a total restriction, I should have included that part. The article that I shared did say that "Under this order, Kalshi is banned from offering wagers on most of those topics in Washington". Thanks for adding that information.

[Sandra_hakeem]

It is not a total restriction.

Contracts tied to sports, elections, politics, entertainment, culture, tech and science are barred while others are allowed. People that are interested in commodities, climate, economics and finance can still make use if the prediction market.

Yep, it's not a total restriction, I should have included that part. The article that I shared did say that "Under this order, Kalshi is banned from offering wagers on most of those topics in Washington". Thanks for adding that information.

Are they just waking up from their slumber? And why is the CFTC, immune by the federal laws trying to litigate one state that issued a ban when this has affected the general public to an extent?

I think he may be meeting prediction market CEOs and discuss about what is going on in the country on states issues with the prediction markets.

Not just that, it's said that if the convener agree to certain adjustments, deliberations on clarity ACT might sell beyond the Senates.

[Dunamisx]

Morning Minute: Trump To Meet Crypto, Prediction Market CEOs This Week

I do not know if I should bring this m, but I think it is worth it. Trump wants to meet crypto and prediction market CEOs and it will be this  week.

They are already having a meeting the 20th of August regarding the clarity art over the use of cryptocurrency and if they are also making this same effort to ensure the cognitive stand over the approach given to prediction market and the way forward on how it also relates or differentiates to gambling or any other trading platform.

[DanWalker]

This is a problem with any innovation. As soon as a fundamentally new asset market or a fundamentally new type of gambling or gambling-like activity emerges, regulators in similar industries immediately try to treat the new innovative market as just another type of the previous ones. As for the prediction market, it's a very specific market and a very specific type of activity—something between traditional trading and traditional betting. It also has many similarities with derivatives markets, such as options. Regulators in many countries don't want to thoroughly examine this; they find it easier to resort to prohibitions.

But I think you understand that early bans aren't the best solution either, because a complete ban usually encourages players to bet around the ban, leading to a black market and tax evasion, which no one wants. While the regulator's approach is certainly understandable, they need time to figure out how to improve the process so as not to hinder players from betting while simultaneously overseeing it logically and fairly. But what I do know is that it shouldn't be unregulated. And such markets have a lot of insider information, which, as someone who enjoys betting, puts me off.

I largely agree with your point. Especially where you said that complete ban can create black market. But IMO bigger question here than ban vs no ban is how the regulation will be designed. Treating prediction market as just gambling leaves out some important aspect of market structure. Again even if we just talk about financial derivative, consumer protection and risk of insider trading are ignored. We are now seeing real example of this in the US, where CFTC is defending the jurisdiction of federally regulated event contracts. But same time, it is also taking enforcement action on insider trading. So for me proper KYC, transparent contract rules, market surveillance, conflict-of-interest restrictions and clear jurisdiction are more important. Banning is easy but regulating well is much harder.

[TedMosby]

Please CMIIW, the more I dig into prediction markets, the more I believe that the people who are able to make money consistently in prediction markets are these groups of people:

1. People who have connections to people or things that are directly connected to the market. In short, people who become insiders, directly or indirectly.
2. People who are able to find edges in the market, like knowing pricing discrepancies between related markets, information delays, market inefficiencies, etc.

So, if you are not #1, you can't just pick a side, then wait and hope for a win. You need to find the edges. You need to do research on many markets available, do calculations, etc. If you don't do this, you don't really need a prediction market. A casino is enough for you.

What I am trying to say from the perspective of someone without an edge is that, a prediction market can basically function like a gambling platform. But there are some people who can find the inefficiencies and make money from them, like they know the glitch, while others are basically taking positions and hoping they win. Hmmm... can I say a prediction market is where traders make money from people who gamble?

[Oshosondy]

South Korea moves to block Polymarket over gambling concerns

With what I I read on the news, Polymarket enabled South Korean won on the site, they took it off when South Korea are reviewing the legality of the site. But South Korea said only this does not justify that Polymarket will not still be under their law.

Their authorities have ordered access to Polymarket to be blocked after determining that the crypto prediction market provides an illegal gambling environment to users in the country.

https://cointelegraph.com/news/south-korea-block-polymarket-gambling-concerns

But this is what I think, Polymarket will still allow South Koreans to have access to the prediction market.

[acroman08]

-snip

I just saw this on my news feed. It looks like South Korea finally came to a conclusion and decided to block Polymarket.

Also, just an addition, I just found out that Australia have also blocked Polymarket for gambling related reasons too(at least according to the article).
source

But this is what I think, Polymarket will still allow South Koreans to have access to the prediction market.

Wouldn't be surprising if they did. But the South Koreans who will still use the platform despite the block would have nowhere to get help from if they face any issues on Polymarket, they might even get fined if they are found out that they are still gambling on Polymarket.

[Zlantann]

South Korea moves to block Polymarket over gambling concerns

With what I I read on the news, Polymarket enabled South Korean won on the site, they took it off when South Korea are reviewing the legality of the site. But South Korea said only this does not justify that Polymarket will not still be under their law.

I don't know why Polymarket and others want to hide behind the name "prediction market" to offer gambling services without receiving licenses. They will keep facing these regulatory challenges until they decide to abide by countries' laws.

Their authorities have ordered access to Polymarket to be blocked after determining that the crypto prediction market provides an illegal gambling environment to users in the country.

https://cointelegraph.com/news/south-korea-block-polymarket-gambling-concerns

But this is what I think, Polymarket will still allow South Koreans to have access to the prediction market.

In its statement to the commission, Polymarket argued that it had removed Korean-language services, does not support payments in Korean won and operates through noncustodial transactions and smart contracts rather than directly managing user funds.

The measures Polymarket is taking to stop Koreans from gambling are not effective. Removing Korean language and the local currency will not stop Koreans from using the platform. So you are right; they will still access the platform.

[Gost ms]

The legality of prediction markets is increasingly being questioned, but as long as they're legal in many countries, they'll continue to be used, even though it's clear to many that there are plenty of insiders. I don't place bets there because I understand my margins will be extremely small or even negative, as I'm not a great expert. But that doesn't mean I should stop trying to improve and gain confidence, to become better than other players. I'm also seeing a trend toward bans on prediction markets in many countries, as well as better regulatory oversight, which could likely benefit the entire ecosystem.

There are so many countries that have banned the prediction market because of the way the operation some of these companies are not licensed in many of the countries they are operating. If the prediction markets are the right thing, we would have not even seeing so many ban from different countries, trying to restrict their operations so their citizens would not use the prediction market.
These companies need to do the right thing so that they will be accepted where they have been banned for more players to patronize them.

We see bans for several reasons. For example, there are many fraudulent prediction markets that cheat everyone, as a result of which prediction markets are banned in many countries, and in many places it is seen that a company starts running prediction markets without any kind of government permission and whenever it comes to the notice of the government, the government takes action against it and as a result we see that it is banned. Yes, as you said, if a company can move forward according to this, then surely we will see a much bigger expansion of it in the future.

[Alex077]

I think he may be meeting prediction market CEOs and discuss about what is going on in the country on states issues with the prediction markets.

I can't help but feel that after this meeting, Trump will do something that would heavily benefit prediction markets.

It is not a total restriction.
Contracts tied to sports, elections, politics, entertainment, culture, tech and science are barred while others are allowed. People that are interested in commodities, climate, economics and finance can still make use if the prediction market.

Yep, it's not a total restriction, I should have included that part. The article that I shared did say that ""Under this order, Kalshi is banned from offering wagers on most of those topics in Washington"". Thanks for adding that information.

I won't say right away that Trump's meeting will definitely be big positive for prediction market. You have to understand that political meeting and actual policy outcome are not same thing. Ultimately what is regulated is more important. If you think main problem is with prediction market and regulator then you are wrong. There is also legal fight going on over federal CFTC jurisdiction and state gambling authority. Afaik CFTC has taken action against state like New York, Wisconsin and New Mexico. Because they believe that federal authority take precedence over federally regulated event contract. So I think what Trump or any other political leader says will matter less in this case. Ultimately legislation, court decision and the actual regulatory framework will be more important.

[Dogedegen]

South Korea moves to block Polymarket over gambling concerns

I am glad that you keep updating the first post in this thread even if you could improve its formatting or style a little bit, keeping track of all the posts and updates and countries is difficult. It makes it even more difficult that this case is specific because the laws of countries are very different when it comes to gambling and financial products. Many or maybe most countries are stuck with very old financial systems and laws that relate to that, there is no innovation at all. That is why the battle for the decision in the US is the most important one, because if the merits weigh into the side of the prediction markets and they are declared financial instruments with maybe some restrictions then that provides room for innovation. I still think that is the best approach compared to the alternatives where it is either a full ban or a full acceptance.

If countries were smarter then they would cooperate and create a joint framework that can be easily applied by most countries of the world. Even with the US they are creating too much complications when in each state there is a different rule or situation when it comes to this case.

[Donk1]

​Perhaps these countries and their governments have their reasons for banning prediction markets, but still it all comes down to how they see the rules and how it's been organized and regulated. To the users it's all about buying which makes it feel more like trading regular stock markets. I think it's all about perspective and assumptions, because the president might think they are doing the people good while the people might think the president is just being selfish. But to my understanding, governments probably just see the platforms as gambling because anything you risk your money for that doesn't certainly have a determined outcome to win is luck.And for the fact that these platforms are something of global use, it seems that they operate without paying taxes or even having licenses which makes it certainly unauthorized. It's easy to say the government just wants to implement their rules, so until these platforms agree to follow local financial rules more countries will probably just keep banning them that's all...

[acroman08]

Connecticut just sued Kalshi. According to the article(link below), the Connecticut Attorney General said that the platform's sports wagering violates the state's consumer protection law prohibiting sports gambling. The Attorney General also said that the way Kalshi's sports event contracts function resembles sports betting, and said that "this is gambling".

As far as I know, Connecticut is the newest state in the US that sued Kalshi for its sports event contracts(I'm sure more will eventually do the same).

soruce: https://abcnews.com/Business/connecticut-sues-kalshi-block-alleged-unlicensed-sports-gambling/story?id=136000170