Australia Defines Prediction Markets as Gambling: ASIC Sets Clear Boundaries

In the world of digital financial products, a storm is brewing that could finally blur the line between investment and gambling. The Australian Securities and Investments Commission (ASIC) has issued a stern warning, drawing explicit parallels between prediction markets and traditional gambling. As platforms like Polymarket and Kalshi gain global popularity, the Australian authority is making it unmistakably clear that it does not view these products as legitimate investment vehicles for retail clients. This decision could have a signaling effect for regulators worldwide currently struggling to categorize these hybrid models.

Sarah Court, Deputy Chair of ASIC, emphasized in an official statement that the commission is not currently convinced that prediction markets for retail clients serve the public interest. The structure of these markets, where users often bet on the outcome of elections, sporting events, or even weather phenomena, strongly reminds regulators of binary options. The latter have been banned for retail clients in Australia since May 2021, after statistical data showed that between 74% and 77% of active users lost money. The parallels are so striking that ASIC is now tightening the screws.

Numbers and facts

The dimensions involved here are massive. Kalshi is reportedly valued at over $40 billion, roughly equivalent to £29.8 billion. Competitor Polymarket is chasing a valuation of $21 billion. Despite this market power, providers are facing fierce resistance. In the United States, the states of Arizona and Utah have even filed criminal charges against Kalshi. Meanwhile, Australia remains a no-go zone. Both Kalshi and Polymarket already list Australia as a restricted jurisdiction to avoid conflicts with local authorities.

ASIC is particularly critical of the risk of market manipulation and the misuse of confidential information. Since prediction markets often lack a clear authority to objectively determine the outcome of an event without manipulation, disputes over payouts frequently arise. Court explicitly pointed out that contracts on sporting results have nothing to do with investments. Instead, they possess all the features of a bet. For Australian investors attempting to access these via offshore platforms, no legal protection under domestic law exists.

"The commission is not currently convinced that prediction markets for retail clients are in the public interest. Event contracts have all the features of a bet and often have nothing to do with investment." - Sarah Court, Chair at ASIC

Background

The global regulatory landscape is deeply divided. While the U.S. Commodity Futures Trading Commission (CFTC) has backed moves by platforms like Crypto.com and Robinhood into event contracts, a cold wind is blowing in Europe. Nine European authorities, including those from Germany, France, the Netherlands, and Italy, have already launched a joint initiative to target unlicensed prediction markets. These regulators view the offerings as a circumvention of strict gambling laws designed to ensure youth and player protection.

In Australia, the rejection is based on the Corporations Act, specifically Section 798A. This requires ASIC to consider the public interest when deciding whether to grant market licenses. Since the authority classifies the products as risky all-or-nothing wagers, the hurdle for licensing is currently virtually insurmountable. The regulator also reminds licensed domestic financial service providers that they violate their statutory duties if they facilitate client access to such illegal offshore offerings.

Why it matters for German players

For German players, the situation is comparably strict, albeit on a different legal basis. In Germany, gambling is governed by the State Treaty on Gambling 2021 (GlüStV 2021). Offerings that allow betting on event outcomes must be licensed by the Joint Gambling Authority of the States (GGL). Prediction markets that disguise themselves as financial products but effectively offer sports or event betting have no legal basis without a German license. From the perspective of the German justice system, anyone operating on such platforms is engaging in illegal gambling.

German users should also note that strict protective measures, such as the monthly deposit limit of 1,000 euros via the LUGAS system or the 1 euro per spin limit for slots, do not exist on these international platforms. This leads to significant financial risk. Since Germany is one of the nine European countries that have announced increased cooperation against such platforms, users must expect payment flows to be blocked or website access to be technically restricted.

What it means for GGL-licensed casinos

For operators with a GGL license, the firm stance of ASIC and European regulators primarily means legal certainty. While unregulated prediction markets try to navigate legal gray areas, licensed German providers offer a protected environment. The classification as gambling by ASIC underscores that legislators worldwide want to more sharply define the difference between serious investment and speculative gambling. In the long run, this could lead to gray market providers being further marginalized, strengthening the legal market in Germany.