The U.K.’s Financial Conduct Authority (FCA) has reportedly engaged with trading platforms over whether its restrictions on financial prediction markets for retail investors could be relaxed, The Times reported.
The discussions come as more British consumers use overseas prediction-market platforms such as Kalshi and Polymarket.
Prediction markets allow participants to take positions on whether specific future events will occur. These contracts can cover everything from economic developments and weather conditions to sporting events. Under the FCA’s current framework, contracts based on financial outcomes and certain weather events can be classified as binary options.
The sale of binary options to retail investors in Britain has been prohibited since 2019.
The FCA is now examining whether that policy should be reconsidered as access to international prediction markets grows among U.K. consumers.
For now, however, the regulator has not publicly backed a change to the ban.
In its latest perimeter report, the FCA maintained that the restriction remains appropriate because prediction contracts can be highly speculative and potentially expose consumers to significant losses. The regulator did, however, leave room for additional work aimed at determining how these products should be accessed or where they sit within the existing regulatory framework.
Industry groups have been urging the FCA to reconsider its approach. According to The Times, representatives have shown officials evidence indicating that millions of U.K. residents are already using offshore prediction-market platforms.
Some consumers reportedly use virtual private networks (VPNs) to circumvent geographic restrictions. Doing so can leave those users outside the protections normally provided by U.K. financial regulation.
The review also follows an FCA discussion paper examining retail investment rules. The paper suggested that certain prediction-market products could fall under the existing binary-options prohibition and raised the question of whether speculative investments should be regulated based on the risks they create rather than the labels attached to them.
Prediction Market Boom
The growing regulatory debate comes as activity in prediction markets accelerates.
Bernstein estimates that worldwide prediction-market trading volume could jump to $240 billion this year from $51 billion in 2025, according to figures cited by The Times.
Leading platforms have also attracted multibillion-dollar valuations. Kalshi has reportedly been valued at $22 billion, while Polymarket has reached a valuation of $21 billion.
The sector is no longer limited to specialist platforms. Companies such as Coinbase, Robinhood and DraftKings have also entered the prediction-market business by launching their own products.
A broader rollout of prediction contracts in Britain would face separate regulatory requirements.
Financial prediction contracts would first need to receive approval under the FCA’s rules. Sports and political contracts would present a different challenge because those markets fall under the Gambling Commission and would require gambling licenses, The Times reported.
The FCA had not immediately responded to CoinDesk’s request for comment.
