Prediction markets have moved well beyond their origins as niche forecasting tools. Platforms offering contracts tied to elections, sports, economic data, weather, entertainment, and other real-world events have attracted growing attention from consumers, financial companies, and policymakers. Monthly prediction market trading volume soared to about $24 billion in April 2026, up from just $5 billion six months prior.
The expansion of prediction markets is further highlighting the regulatory challenge for governments worldwide. Should the event contracts on these platforms be treated as financial products, gambling, or something that requires a new category of oversight?
So far, governments are reaching different conclusions. Some regulators view event contracts through existing securities or derivatives frameworks, while others believe their similarities to betting exchanges make gambling regulation more appropriate. That divide is becoming increasingly important as prediction market platforms seek to operate across borders.
Why Prediction Markets Have Become a Global Policy Issue
Prediction markets allow users to buy and sell contracts based on whether a particular event will happen. A contract could relate to an election result, an interest-rate decision, or a sports outcome. Rather than simply placing a traditional wager, users can trade contracts whose prices change as market expectations shift. That structure can make prediction markets resemble financial exchanges, but the underlying activity is remarkably similar to gambling.
That distinction is important because gambling and financial markets are generally governed by different regulatory systems. Gambling frameworks typically emphasize licensing, age restrictions, responsible gambling, advertising, consumer protection, and the integrity of betting markets. Financial regulation, meanwhile, focuses on issues such as market conduct, disclosure, investor protection, registration and manipulation.
The rapid growth of prediction markets is forcing governments to determine which framework best fits a product that can share characteristics with both. The scale of the industry is adding urgency, especially with the start of the 2026 NFL season further amplifying the prevalence of sports contracts. Kalshi and Polymarket, two of the biggest operators in the industry, recorded $14.1 billion in trading volume, including $3.76 billion for sports, during the week of Sept. 7-13.
Canada’s Evolving Approach to Prediction Markets
Canada offers a useful example of how regulators are attempting to draw boundaries between different types of event contracts.
In August, the Canadian Securities Administrators (CSA) and Canadian Investment Regulatory Organization (CIRO) reaffirmed its position that it will not oversee sports and entertainment outcomes. Political and economic contracts remain part of a developing regulatory discussion, leaving open questions about where certain products should ultimately be classified.
Canadians cannot access Kalshi’s full U.S. market directly, but Wealthsimple Predict provides access to a limited selection of Kalshi event contracts approved for the Canadian market. Users can only trade in financial, economic, and environmental event contracts with terms to maturity of at least 30 days.
How Europe Has Treated Prediction Markets under Gambling Regulations
Europe has generally approached prediction markets more cautiously, although there is no single European framework governing them.
This past February, the United Kingdom’s Gambling Commission said prediction markets offered in Great Britain would appear to fall within the existing definition of a betting intermediary, depending on the operator’s business model. The regulator compared the products with betting exchanges, which have been established in the country for decades. The Financial Conduct Authority (FCA) has separately prohibited the sale of binary options to retail investors since 2019, a restriction that can apply to certain financial and weather-related event contracts
However, the regulatory approach is under review. The FCA’s position remains that a ban is appropriate because of the speculative nature of these products and potential consumer harm, but the growing use of overseas platforms has complicated that stance. Some UK consumers bypass geographic restrictions with virtual private networks (VPNs), potentially leaving them without the protections that would apply to regulated domestic platforms.
The European Union presents a more fragmented picture. The European Securities and Markets Authority (ESMA) warned in July that event contracts can fall within existing financial market rules depending on the question being asked. Local licenses are required, however. The month prior, gambling regulators from France, Germany, Spain, and six other European jurisdictions agreed to cooperate against prediction-market platforms that do not comply with local gambling rules.
Why Governments Differ on Whether These Platforms Are Financial Products or Gambling
The disagreement largely stems from how regulators view the economic function of prediction markets. From a financial-market perspective, event contracts can reflect collective expectations, with prices changing as supply, demand, and new information shift. From a gambling perspective, users’ returns depend on uncertain outcomes, particularly in sports, where contracts resemble traditional wagers.
The distinction can also depend on the event. An interest-rate contract may appear more financial than a football contract, even when both use similar trading mechanisms. That leaves regulators weighing whether classification should depend on a product’s structure, underlying event, marketing, or how consumers use it. Consumer protection adds another challenge, as financial and gambling frameworks offer different safeguards.
The Challenges of Regulating Global Digital Platforms
Prediction markets expose a familiar regulatory problem: digital platforms can operate across borders more easily than national laws can be harmonized. An operator may be permitted under one country’s financial rules while another classifies the same activity as gambling, creating challenges involving licensing, geolocation, advertising, taxation, age verification, and enforcement.
Market integrity presents an even greater concern. Contracts tied to political, sporting, or geopolitical events can give participants access to information unavailable to the broader market. That raises the risk of insider trading, particularly when individuals with advance knowledge of an outcome can trade before information becomes public. Former US representative George Santos was recently given a lifetime ban from Kalshi, the latest in a series of publicized insider trading cases.
Cryptocurrency payments can further complicate oversight. As prediction markets expand globally, regulators may need greater international cooperation to monitor platforms, protect consumers, and maintain market integrity.
What International Regulatory Trends May Look Like over the Next Decade
The next decade is unlikely to produce a single global approach to prediction markets. Instead, regulatory divergence is likely to continue, alongside efforts to establish clearer boundaries between gambling and financial markets. Some countries may expand gambling frameworks to cover prediction markets, particularly sports and entertainment contracts. Others could create specialized financial rules for event contracts.
Canada’s recent decisions demonstrate why that distinction matters. Sports and entertainment contracts have been pushed outside the securities framework, but that does not automatically answer which regulator should oversee them. Regulators around the world are likely to prioritize consumer protection, market surveillance, and cross-border enforcement as trading volumes increase.
Ultimately, prediction markets are forcing governments to reconsider regulatory categories created before digital platforms enabled global event-based trading. How governments resolve that distinction could shape the future of cross-border financial innovation.
