ASIC questions whether prediction markets serve the public interest

Australia's corporate regulator ASIC has warned that retail prediction markets may not be in the public interest. According to a statement published on Friday by ASIC chair Sarah Court, the all-or-nothing structure of these products and their focus on events such as weather and sport make them resemble betting more than investing. The products were said to share features with binary options. Binary options are banned for retail customers in Australia.

The regulator stressed that overseas platforms do not directly protect their users under Australian law. If Australian licence holders make access to these platforms easier, they must meet their regulatory obligations. According to ASIC's consumer guide, no prediction market operator in Australia is licensed as a financial market. The guide listed as risks the possibility of insider information being used, disputes over how an event was resolved, and the absence of dispute resolution processes and customer money protections on unlicensed overseas platforms.

The regulator's stance is linked to section 798A of the Corporations Act. This provision requires ASIC to consider the public interest when granting an Australian market licence. It was reported that Polymarket's site lists Australia among restricted countries, and that Kalshi, according to its January update, lists the country as a 'restricted jurisdiction'.

ASIC's warning is a continuation of its measures against binary options. The ban on offering and distributing products to retail customers took effect on 3 May 2021 and was later extended to 1 October 2031. In the 13 months before the ban, between 74 and 77 percent of active retail customers lost money, and total losses reached 14 million dollars. The regulator also said its statement is not a formal decision on all prediction-style products. In Europe, meanwhile, nine authorities announced a joint initiative this summer targeting unlicensed prediction market platforms. Belgium, France, Germany, Italy, the Netherlands, Poland, Portugal, Spain and Switzerland committed to increasing cross-border cooperation.