Letting Prediction Markets In Is the Easy Part

The FCA is considering whether to ease its ban on retail prediction markets. In December 2025 it asked, through discussion paper DP25/3, how consumers should access higher-risk investments. The Times reported this month that it has been talking to platforms about opening the door. Feedback is due this quarter.

Our view is that the FCA is right to look again. A 2019 ban that millions of UK consumers reportedly route around with a VPN is not protecting many of them. But the debate so far has been about access, and access is the easy part. The hard part starts the day a regulated UK platform goes live.

The line between an investment and a bet will not hold

The UK splits these contracts by subject. A contract on the Bank Rate or the FTSE 100 is a binary option, and the FCA regulates it. A contract on a football match or an election is a bet, and the Gambling Commission licenses it. A platform offering both needs both licences.

That line looks clean on paper. It will not look clean in practice. Is a contract on whether the Chancellor survives the Budget political or financial? What about a contract on whether a listed club is relegated, or whether a named chief executive leaves by year end? Each new contract will test the boundary, and the platforms will have every incentive to list whatever trades. We expect the first real dispute to be about classification, not conduct.

One app, two rulebooks, and a confused customer

A customer can move from an FCA-regulated contract to a Gambling Commission one with a single tap on the same screen. The complaints route changes. The marketing rules change. The consumer protections change. Consumer Duty applies on one side of the line and not the other.

No customer will read the regulatory status of a contract before they trade it.

The rulebook assumes they will. When something goes wrong, and it will, the customer will not care which regulator was responsible. They will blame the platform, and the press will blame both regulators.

Consumer Duty was not written for this

Consumer Duty asks firms to show that products deliver fair value and good outcomes for a defined target market. That is a hard test for a contract where, before fees, one side's gain is the other side's loss. Fair value for a zero-sum product is a difficult argument to make, and a harder one to evidence with outcomes data.

It is harder still inside a wealth or investment app. The FCA has spent years warning about the gamification of investing. Placing event contracts next to ISAs and pensions, in the same app and under the same brand, sends the opposite signal. We think this is where the FCA's own thinking will come under the most strain.

Market abuse rules have a blind spot

UK market abuse rules were built around securities, issuers and inside information about them. Event contracts break that model. The person with inside information may be a team physio, a civil servant or a campaign staffer, none of whom sit anywhere near a trading desk. In some markets a participant can influence the very outcome they are trading on. Overseas, this is already a live problem. Surveillance built for listed equities will not catch it.

Liquidity will decide whether it is a market at all

The strongest argument for prediction markets is that prices pool information and produce better forecasts than experts. That argument holds for deep, liquid contracts on genuinely uncertain outcomes. It fails for thin contracts that a handful of participants can move. In the US, sports contracts dominate volume on the largest platforms. There is little reason to think the UK will be different.

A regulated label will lend these prices a credibility they have not always earned. The media will quote them as forecasts. Most will simply be odds.

Our view

Bringing prediction markets onshore is better than pretending UK consumers are not already using them. But a dual licence is a solution to a jurisdiction problem, not a conduct problem. The FCA should decide the classification boundary before platforms decide it for them, and be clear on how Consumer Duty and market abuse rules apply to event contracts before the first UK incident forces the answer.

For firms thinking about offering these products, the question is not whether they can get the licences. It is whether they can defend the product in front of their own board, their customers and the FCA a year after launch. If you would like to talk that through, get in touch with your Trescore contact.