ASIC Questions Public Interest in Retail Prediction Markets

Australia’s corporate regulator, ASIC, has raised concerns that retail prediction markets may not serve the public interest, citing their resemblance to wagers and lack of investor protections. This follows a 2021 ban on binary options for retail clients in Australia.

What Happened

The Australian Securities and Investments Commission (ASIC) has stated that retail prediction markets may not be in the public interest, noting their “all-or-nothing structure” and focus on events like weather and sport, which make them resemble wagers rather than investments, according to iGaming Business. ASIC chair Sarah Court issued a statement on Friday, indicating that these products share characteristics with binary options, which are prohibited for retail clients in Australia.

ASIC also cautioned that offshore prediction market platforms do not offer protections under Australian law, though Australian license holders facilitating access to these platforms must still fulfill their regulatory obligations. The regulator’s consumer guidance clarified that no prediction market operator currently holds a financial market license in Australia. It identified risks including the potential use of confidential information, disputes over event resolution, and the absence of dispute-resolution processes and client-money safeguards on unlicensed offshore platforms, as reported by Predictable.gg.

This position from ASIC is tied to section 798A of the Corporations Act, which mandates ASIC to consider the public interest when evaluating applications for an Australian market license. As of iGB’s confirmation, Polymarket has listed Australia as a blocked country, and a January update indicates Kalshi also lists Australia as a “restricted jurisdiction,” according to Prediction Frontier.

Key Details

• ASIC’s concerns link retail prediction markets to binary options, which were banned for retail customers in Australia in May 2021, with the ban extended to October 2031, according to iGaming Business.
• The regulator previously reported that 74% to 77% of active retail clients lost money in binary options, totaling combined losses of $14 million, in the 13 months before the original ban, per iGaming Business.
• Offshore prediction market platforms do not provide Australian legal protections to direct users, though licensed Australian facilitators must still meet regulatory duties, as stated by ASIC chair Sarah Court.
• ASIC’s stance is based on section 798A of the Corporations Act, which requires the regulator to assess the public interest when considering market license applications, according to Predictable.gg.

Why It Matters

ASIC’s statement underscores a tightening regulatory environment for prediction markets globally, aligning with actions taken by multiple European authorities. This summer, nine European regulators from Belgium, France, Germany, Italy, the Netherlands, Poland, Portugal, Spain, and Switzerland announced a joint initiative to enhance cross-border cooperation and oversight of unlicensed prediction market platforms, as reported by iGaming Business. ASIC’s current concerns, while not a formal ruling on every prediction-style product, indicate the criteria against which future market license applications would be assessed, specifically the public-interest test. The regulator’s previous ban on binary options, which resulted in significant retail client losses, sets a precedent for its approach to products perceived as high-risk and speculative.

What’s Next

ASIC’s statement indicates that any future application for a market licence for prediction-style products would be assessed against the public-interest test, according to iGaming Business.