ASIC Is Not Betting on Prediction Markets for Retail Clients

The Australian Securities and Investments Commission (ASIC) has announced its position on prediction markets, stating that it is "not currently convinced" that offering them to retail clients is in the public interest.

The regulator emphasized that offshore prediction markets carry no Australian legal protections, and licensees that facilitate access to them must continue to fulfill all their obligations under Australian law.

ASIC Deputy Chairwoman Sarah Court highlighted that prediction market contracts share the "all-or-nothing" outcome feature with binary options, which are prohibited for retail clients in Australia.

The regulator noted that many of the underlying events for these contracts have nothing to do with investment, providing examples such as whether it will rain tomorrow or whether a sporting team will win and by how many goals.

These characteristics raise questions about whether prediction market contracts are appropriately described as investment products, according to ASIC.

The regulator also pointed to significant market integrity risks, including the misuse of confidential information, market manipulation, and disputes over how outcomes are determined.

Offshore Platforms Offer No Protection

ASIC addressed two groups directly in its announcement.

Australians who choose to access offshore prediction markets online should be aware that they do not have protections under Australian law.

Australian financial service licensees that facilitate access to offshore prediction markets were told that all of their licence obligations under Australian law continue to apply to that activity.

Under section 798A of the Corporations Act 2001, ASIC is required to have regard to whether granting an Australian market licence would be in the public interest.

Binary Options Precedent and Global Trends

This position follows the regulator’s treatment of binary options, a product it banned for retail clients in May 2021.

Finance Magnates reported that in the 13 months before the ban, 74% to 77% of active retail clients lost money trading binary options, with aggregate net losses of A$14 million.

The regulator later extended the ban until 1 October 2031, restricting licensed brokers from offering the product to retail traders.

Separately, ASIC’s limits on the leverage offered to retail clients run until 23 May 2027.

The approach also matches that of several comparable jurisdictions, including parts of Europe and the UK, where regulators have restricted access to event contracts with similar characteristics to binary options.

Prediction markets have been expanding elsewhere in the industry, with Robinhood selectively listing contracts to avoid markets where insider information or manipulation risks are harder to control.

In April, US authorities charged a soldier in what was described as the first insider trading case linked to prediction markets.