Prediction markets and binary options might look similar, but “they differ in what they reference and how they’re typically structured,” said Jon Light, Senior Director of Product Management at Devexperts. He also touched on the risk concentrations of event contracts and the appropriate regulations of these markets, saying: “In many jurisdictions, these products would likely fall under gambling or betting regulations rather than traditional financial market regulation.”
The popularity of prediction markets has exploded since the last US Presidential election. Although Kalshi and Polymarket remain the de facto leaders, many mainstream brokers are also diving into this market. Plus500's entry as an event contracts clearing partner, and IG Group CEO's confirmation of internal discussions, also show the CFD brokerage giants' interest in these markets.
Read more: The US Prediction-Markets Fight Just Split Into Two Opposite Lawsuits. Plus500 Sits In The Middle
However, for European and UK brokers, prediction markets carry an uncomfortable comparison. The structure of event contracts closely resembles the binary options products regulators spent years restricting, even if the underlying events are different. At the same time, infrastructure providers are increasingly treating prediction markets as an extension of existing brokerage technology rather than an entirely new asset class.
Devexperts, which launched event-based trading infrastructure in November 2025, says most brokers already have the technical foundation needed to support these products. The company is one of the infrastructure vendors positioning event-based trading as a white-label extension for brokers and exchanges entering prediction markets.
Light believes that the bigger challenges for prediction market players are liquidity and regulation. While event-based contracts can integrate relatively easily into existing trading systems, brokers still face uncertainty around licensing, market classification, and managing liquidity around highly volatile real-world events.
The prediction markets landscape, May 2026 👇
— Cam ☯️ (@onchaincam) May 19, 2026
Sector volume hit $51B in 2025. On pace for ~$240B in 2026.
Bernstein projects $1T by 2030.
Four things worth knowing:
1. Kalshi just overtook Polymarket as the biggest prediction market.
They doubled their valuation to $22B in 5… pic.twitter.com/NqOiUik45w
“The Main Difference Is Usually in the Execution and Liquidity Model”
Brokers and trading platforms are already seeing strong demand for event-based products. As Finance Magnates previously reported, Robinhood disclosed that customers traded 8.8 billion event contracts in the first quarter of 2026 alone.
“The main difference is usually in the execution and liquidity model,” Light explains. “So the distinction is generally less about what is being traded, and more about how trades are executed, how liquidity is sourced, and integrated into the broader platform ecosystem.”
Brokers entering prediction markets generally follow three approaches, with regulatory constraints often shaping those decisions as much as technological considerations.
Retail brokers and trading apps often connect directly to regulated venues such as Kalshi to gain faster market access and external liquidity without operating the market infrastructure themselves.
Brokers that want a branded event-trading offering but lack in-house derivatives infrastructure typically rely on white-label providers such as Devexperts and Leverate. Meanwhile, larger exchanges and firms with existing derivatives expertise may build proprietary systems to maintain greater control over liquidity, pricing, and product design.
- The Growth of the Finance Everything App
- AI as a Churn Prediction and Revenue Retention Tool
- Taking Stock of the Retail Prop Trading Market
“Risk Is Often Concentrated”
Brokers face operational and risk challenges when deciding whether to build event markets in-house or connect to existing venues.
According to Light, the biggest hurdles so far have been less technical than regulatory or structural. Event-based products operate similarly to futures markets under the hood, making integration into existing brokerage infrastructure relatively straightforward for many firms.
Liquidity remains one of the biggest operational problems for brokers and exchanges entering the segment. Trading activity often spikes around elections, central bank decisions, or major sports events before dropping sharply afterwards, creating thin order books and wider spreads.
Market makers also face the risk of being “picked off” by traders reacting to breaking news faster than quotes can update, forcing liquidity providers to widen spreads to protect themselves.
A recent Chainalysis report described this dynamic as a “liquidity paradox,” where platforms rely on sophisticated traders to keep prices accurate, but risk losing the retail participation needed to sustain liquidity.
Light elaborated that the core risk principles remain similar to traditional derivatives, but event-based trading introduces different exposure dynamics. “Risk is often concentrated around binary outcomes, sharp volatility spikes, and specific settlement events rather than continuous market movement.”
Operationally, brokers and exchanges need robust pricing systems, market surveillance, settlement logic, and protections against manipulation, especially around politically sensitive or news-driven events. “Liquidity management also becomes more important, as trading activity can surge rapidly around key events and then disappear just as quickly,” Light adds.
Event Contracts and Binary Options “Are Based on Simple Yes/No Outcomes with Fixed Payouts, but They Differ”
One of the central regulatory questions around prediction markets is whether they should be treated as a new form of derivatives trading or as a variation of the binary options products that many regulators restricted years ago. Light argues the payoff structure may look similar, but the underlying reference points and regulatory treatment differ materially.
“Both are based on simple yes/no outcomes with fixed payouts, but they differ in what they reference and how they’re typically structured. Binary options usually relate to financial instruments, like whether a price is above or below a level, while event-based contracts focus on real-world outcomes such as elections, economic releases, or sports results.”
Light notes that exchange-traded event contracts are treated as regulated derivatives in some markets, while many jurisdictions may ultimately classify prediction markets closer to gambling or betting products, potentially creating licensing challenges for CFD brokers in Europe and the UK.
“However, in many jurisdictions these products would likely fall under gambling or betting regulations rather than traditional financial market regulation, meaning firms may need to operate under gambling licenses depending on the structure of the offering.”
The number of people actually making money from prediction markets is less than th ose who are buying 15% consistency rule prop accounts. Change my mind.
— Josh Dentrinos - Founder of Trader Fights (@PropJoshD) May 19, 2026
“Traditional Exchanges Are Moving into Event-Based Products”
The long-term structure of the sector remains unsettled, as firms weigh liquidity access, compliance requirements, and the risk of tighter regulation. However, Light believes brokers and exchanges are unlikely to converge around a single model.
“We’re already seeing traditional exchanges like CME Group moving into event-based products, and there is strong interest from firms looking to package this as an institutional asset class,” he says.
In August 2025, CME Group announced a partnership with FanDuel to launch event-based contracts for retail customers — a sign that institutional infrastructure is moving toward the same space.
“So the likely outcome in the near term is a hybrid: embedded offerings within existing venues, alongside a few dedicated platforms.”
