Australia’s corporate regulator has set out its position on prediction markets, saying it is “not currently convinced” that offering them to retail clients is in the public interest.
The announcement, as issued, states ASIC’s current stance rather than a formal ban.
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The Australian Securities and Investments Commission (ASIC) said prediction market contracts have “all the features of a bet.” It described them as highly speculative, typically involving an all-or-nothing outcome tied to a particular event, a trait they share with binary options. Binary options are prohibited for retail clients in Australia.
ASIC noted that many of the underlying events have nothing to do with investment. Its examples included whether it will rain tomorrow, or whether a sporting team will win and by how many goals. The regulator said these features raise questions about whether prediction market contracts are appropriately described as investment products.
Integrity Risks and Offshore Access
ASIC also pointed to market integrity risks. These include the misuse of confidential information, market manipulation and disputes over how outcomes are determined.
The regulator addressed two groups directly. Australians who choose to access offshore prediction markets online should be aware that they do not have protections under Australian law, ASIC said. 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.
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The Binary Options Precedent and the Wider Market
The position follows the regulator’s treatment of binary options. Both products involve speculating on the binary outcome of a future event. Prediction market contracts are generally offered through a market platform, while binary options are sold over the counter via brokers.
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.
ASIC banned the sale of binary options to 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.
Prediction markets have been expanding elsewhere in the industry. Finance Magnates reported in April that Robinhood was selectively listing contracts, avoiding markets where insider information or manipulation risks are harder to control. In the same month, US authorities charged a soldier in what was described as the first insider trading case linked to prediction markets.
