The Australian Securities and Investments Commission (ASIC) has expressed concern that retail prediction markets may not align with the public interest. In a statement released on Friday, ASIC chair Sarah Court noted that these markets, which focus on outcomes like weather and sports, share characteristics with gambling rather than traditional investments due to their all-or-nothing nature.
Court highlighted that the features of these products are reminiscent of binary options, which are prohibited for retail clients in Australia. She also pointed out that platforms located offshore do not afford users the protections guaranteed under Australian law. Notably, Australian licensees that offer access to these offshore markets are still obligated to comply with local regulations.
ASIC’s guidance underscores that no operator of a prediction market currently holds a license as a financial market in Australia. The agency flagged various risks associated with these products, including the potential misuse of confidential information, potential conflicts regarding the determination of event outcomes, and the absence of processes for dispute resolution and client fund protections on unregulated offshore platforms.
This concern is grounded in section 798A of the Corporations Act, which mandates ASIC to evaluate the public interest before granting market licenses in Australia. iGB also reported that Polymarket has listed Australia as one of the countries it blocks, while Kalshi identified it as a restricted jurisdiction in a January update.
ASIC's warnings are set against the backdrop of its ongoing actions regarding binary options. Since May 3, 2021, the issuance and distribution of binary options to retail customers have been banned, a prohibition that was recently extended to last until October 1, 2031. Statistics from ASIC reveal that in the 13 months preceding the initial ban, 74% to 77% of active retail clients incurred losses, summing up to a total loss of $14 million.
The warning from ASIC coincides with a shifting regulatory environment surrounding prediction markets in Europe. This summer, nine European regulatory authorities collaborated on an initiative aimed at unlicensed prediction market platforms, signifying a commitment to enhancing cross-border supervision in this rapidly evolving sector.
While ASIC's statement does not constitute a blanket ruling on all forms of prediction products, it outlines the regulator's existing apprehensions and indicates that any future licensing requests will be subject to a public-interest evaluation.
