Prediction markets gain traction despite regulatory pushback

Prediction markets have moved beyond a small online interest. They now cover politics, entertainment, and even military actions, sometimes forecasting events with surprising precision. In January, bets appeared hours before the U.S. carried out an operation in Venezuela, anticipating the result before official announcements.

The wager that outpaced the news cycle

An unknown trader turned $32,000 into $436,759 by correctly forecasting the U.S. would capture Venezuelan leader Nicolás Maduro. The account, labeled “Ox31a56e” on Polymarket, also placed bets on U.S. forces entering Venezuela by January 31, an invasion by that date, and President Trump invoking war powers. Each wager ranged from $1,500 to $273,000, all processed through the blockchain network Polygon.

Polymarket has not commented on the account or whether insider information influenced the trades. Steven Pettigrove, a partner at Piper Alderman focusing on financial services and fintech, noted the regulatory difficulties these markets present. “It’s a complex area because setting clear rules for these bets is challenging,” he said. “In most cases, Polymarket reviews them, but defining terms like ‘invasion’ can involve many interpretations.”

Australia restricts access while global interest rises

In Australia, prediction markets fall under illegal gambling. The Australian Communications and Media Authority decided last August that Polymarket broke the Interactive Gambling Act 2001 by offering an unlicensed betting service to Australian users. The platform was added to the national list of restricted offshore gambling sites, and internet providers were instructed to block access.

The ACMA determined Polymarket provided a prohibited interactive gambling service and an unlicensed regulated service with an “Australian-customer link,” meaning it targeted users in the country. No national license exists for such services, and legal operation requires approval from a state or territory.

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Media organizations have begun integrating this data. Polymarket supplies information to Dow Jones for The Wall Street Journal, while CNN uses Kalshi’s real-time market data in its coverage of politics, economics, and major cultural events. The phenomenon, sometimes called the “Polymarket Effect,” shows how quickly these platforms reflect public sentiment—faster than polls or expert analysis.

Pettigrove pointed out that Australia’s approach differs from the U.S. “Prediction markets operate in a regulatory gray area,” he said. “ACMA classified Polymarket as a gambling platform, while the U.S. treats them as regulated financial services.”

Regulators struggle to categorize these markets. Some bets resemble financial tools, like hedging election outcomes, while others mirror sports wagering. “There’s a financial benefit in pricing or hedging events such as elections,” Pettigrove said. “But others function more like traditional betting.”

Australia’s financial regulators have taken strict measures against similar products. The Australian Securities and Investments Commission banned binary options for retail clients in 2021 after finding that 80% lost money. Retail traders lost an estimated $490 million on binary options in 2018, with additional losses of $6.7 million the next year.

For prediction markets to establish themselves in Australia, they must meet rigorous licensing standards. Pettigrove explained that the obstacles are significant, especially for individual investors. “These markets resemble binary options because they involve zero-sum bets on event outcomes,” he said. “Regulations heavily restrict offering derivatives to retail customers due to the high risks.”

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He believes regulated prediction markets will emerge eventually. “It’s likely only a matter of time,” he said. “These platforms have gained major traction in the U.S., and Polymarket has attracted investment from institutions like the New York Stock Exchange to expand.”

The challenge remains how regulators will respond. As long as anonymity and real-time data drive their popularity, the conflict between innovation and oversight will continue. Australia’s ban stays in effect for now, but pressure to reconsider is increasing.

For those interested in similar regulatory processes, understanding police clearance requirements in other countries can provide useful context.

Pettigrove says, “We haven’t seen any kind of regulated prediction markets enter the Australian market, but I think it’s only a matter of time before that’s the case.