ASIC Not Convinced Retail Prediction Markets Serve Public Interest
Australia's corporate regulator has said it is not currently convinced that prediction markets for retail clients are in the public interest.
In a statement attributed to ASIC chair Sarah Court, published on Friday, October 30, the Australian Securities and Investments Commission said the contracts have all the features of a bet.
The position adds to a run of regulatory pushback against event contracts.
Other recent moves are collected in our report on how prediction markets face a global squeeze.
Why ASIC Sees A Bet
ASIC said prediction market contracts are highly speculative and typically carry an all-or-nothing outcome tied to whether a particular event happens.
That, it noted, is a characteristic they share with binary options, which are prohibited for retail clients in Australia.
The regulator pointed out that many of the events have nothing to do with investment. Its examples were whether it will rain tomorrow or whether a sports team will win, or by how many goals.
Those features, ASIC said, raise questions about whether the contracts can properly be described as investment products.
It also flagged market integrity risks, including the misuse of confidential information, market manipulation and disputes over how outcomes are determined.
Offshore Platforms And Licensees
The statement carries a warning for consumers.
Australians who choose to reach offshore prediction markets directly online should know they do not have protections under Australian law.
Financial services licensees that help clients reach offshore prediction markets were also reminded that all their licence obligations under Australian law continue to apply to that activity.
The Binary Options Precedent
In background material issued with the statement, ASIC said section 798A of the Corporations Act 2001 requires it to consider whether granting an Australian market licence would be in the public interest.
It described its approach to prediction markets as consistent with its handling of binary options, since both involve speculating on the binary outcome of a future event. The main difference is delivery: prediction market contracts are generally offered on a market platform, whereas binary options are sold over-the-counter through brokers.
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ASIC banned the sale of binary options to retail clients in 2021 and later extended the ban until 2031. It said the decision followed data showing that up to 77% of retail clients had lost $14 million in the last year.
The statement is attributed to Court as ASIC chair, making it the regulator's formal public position rather than a staff comment. It does not name any specific platform or product.
The regulator also said its view aligns with the approach taken in several comparable jurisdictions, including parts of Europe and the UK, where regulators have restricted access to event contracts with characteristics similar to binary options.
What The Statement Does Not Do
ASIC described the release as a point-in-time statement and advised readers to check its website for subsequent media releases on the same subject.
The statement stops short of announcing a ban or new rules, so for now it signals how the regulator is thinking about licence applications and about firms facilitating offshore access.
