UK Opens Door to Talks With Prediction-Market Operators as Regulatory Review Advances

Britain is taking a closer look at the rapidly expanding prediction-market sector, with the Financial Conduct Authority (FCA) holding discussions with major operators including Kalshi and Polymarket as the companies explore potential entry into the UK market.

Simon Walls, the FCA’s executive director for markets, confirmed the regulator’s engagement with the companies during its annual public meeting on 6 October, signalling that British authorities are prepared to examine how the emerging products could fit within the country’s existing financial and gambling frameworks.

“We are engaging,” Walls said. “We are interested in their plans for the UK.”

The discussions come as prediction markets have expanded sharply in the United States, where platforms allow users to trade contracts based on the eventual outcome of events. Such contracts can cover financial indicators, politics, sport and entertainment, with prices generally reflecting the market’s collective assessment of the likelihood of a particular outcome.

The rapid growth of the sector has increasingly brought prediction-market operators into competition with conventional bookmakers and betting exchanges. At the same time, regulators on both sides of the Atlantic are wrestling with a fundamental question: whether these contracts should be treated primarily as financial products or as gambling.

Kalshi and Polymarket prepare for Britain

The two most prominent companies involved in the UK discussions have already taken steps indicating a serious interest in the market.

Kalshi has established a British subsidiary, while Polymarket has reportedly begun working with UK lobbying interests as it considers how it could operate in the country.

Neither company, however, currently has the regulatory approvals necessary to offer its services to British consumers.

That leaves the companies facing a complicated regulatory landscape in which the classification of a contract depends substantially on what underlying event it covers.

For financial prediction products, the FCA's existing rules present a significant obstacle. The regulator has said that the financial prediction-market products it has examined amount to binary options.

Britain has maintained a permanent prohibition on the sale, marketing and distribution of binary options to retail consumers since April 2019.

When that ban was introduced, then-FCA executive director of strategy and competition Christopher Woolard characterised binary options as “gambling products dressed up as financial instruments.”

The regulatory challenge has become more complicated as the latest generation of prediction markets has broadened the range of events on which contracts can be traded.

Different rules for financial, political and sporting contracts

The FCA’s March 2026 perimeter report drew a distinction between different categories of event contracts.

Financial contracts, along with certain contracts linked to climatic events, fall within the FCA’s regulatory perimeter. The regulator's present position is that the financial prediction-market products it has reviewed are binary options and therefore remain prohibited for retail customers.

Political and sporting contracts are treated differently.

Where contracts concern non-financial events such as elections or sporting outcomes, responsibility falls primarily to the Gambling Commission rather than the FCA.

The Gambling Commission has previously indicated that prediction-market operators seeking to launch in Great Britain would probably be treated as betting intermediaries under existing gambling legislation, putting them into a regulatory category comparable to established betting exchanges.

Brad Enright, the Commission’s director of strategy, has said operators would not be able to present their products as non-gambling offerings simply by describing them as financial or trading products.

The Commission has also warned that operators without the appropriate British licence must ensure that they do not target or transact with consumers in Great Britain. Operating without the necessary authorisation can carry criminal consequences.

The UK government has likewise stated that a prediction market seeking to operate legally in Great Britain would require a Gambling Commission licence and, if approved, would be classified as a “Betting Intermediary” under the Gambling Act 2005.

UK market differs significantly from the US

The regulatory debate in Britain is taking place against a very different market backdrop from that found in the United States.

In the US, one of the attractions of prediction markets has been their ability to offer event contracts in areas where conventional sports betting remains unavailable or restricted because of state-level regulation.

Britain does not have the same gap to fill.

Sports betting is already legal throughout Great Britain under a nationwide regulatory framework, while betting exchanges have been established in the market for more than two decades.

The Gambling Commission has previously stressed that the commercial circumstances that drove the US prediction-market boom are therefore not necessarily replicated in Britain. In February, it said prediction markets would not be able to classify themselves as non-gambling products if they launched in Great Britain and warned unlicensed operators against targeting British consumers.

That distinction could prove important for prospective entrants. A major selling point of prediction markets in the United States has been their ability to occupy territory between financial markets and traditional betting. In Britain, however, existing gambling regulation already covers much of the territory that these platforms might seek to enter.

FCA to examine risks including liquidity and manipulation

Despite those obstacles, the FCA is not closing the door on the sector.

The regulator is reviewing its approach to prediction markets and is expected to publish an engagement paper before the end of 2026. That document could provide greater clarity on how authorities intend to deal with the new generation of event-based contracts.

Among the issues under consideration are the risks associated with low liquidity and potential market manipulation.

Liquidity is particularly important for prediction markets because their usefulness depends heavily on the ability of participants to buy and sell contracts efficiently. Thinly traded markets can produce prices that are less reliable as indicators of probability and can potentially make markets more vulnerable to manipulation.

The FCA's review therefore appears likely to consider not only whether prediction-market contracts technically fall within existing financial rules, but also whether the structure and trading characteristics of the products create risks that require additional safeguards.

No UK launch has yet been approved

The latest discussions should not be interpreted as a regulatory green light for Kalshi, Polymarket or other operators.

No change to Britain's existing rules has been announced, and no prediction-market operator has received approval to begin offering its products to British retail customers under the arrangements currently being considered.

Instead, the FCA's engagement represents an early stage in a regulatory examination of a rapidly evolving market.

For prospective entrants, the central challenge will be establishing which regulatory regime applies to each individual product.

A financial event contract could fall under the FCA's binary-options restrictions, while a contract based on a political or sporting outcome could come under the Gambling Commission's jurisdiction and potentially require gambling licensing.

That distinction means that the question of whether prediction markets can enter Britain may ultimately be less straightforward than simply deciding whether the sector should be permitted.

A regulatory crossroads for the industry

The UK's emerging approach highlights the broader difficulty regulators face in defining prediction markets.

The platforms describe their products as markets in which participants trade contracts reflecting expectations about future events. Regulators, meanwhile, must determine whether those contracts function primarily as financial instruments, betting products or something that requires a new regulatory treatment altogether.

In Britain, the existing framework currently points toward different answers depending on the type of event being traded.

The Gambling Commission's position is already relatively clear for sports and political markets: operators cannot simply avoid gambling regulation by presenting their products as trading platforms. For financial prediction markets, meanwhile, the FCA's existing binary-options prohibition remains a major barrier to retail participation.

The upcoming FCA engagement paper could therefore become an important milestone for the industry, particularly if it provides greater detail on how Britain intends to distinguish between legitimate financial-market activity and products that regulators believe carry unacceptable risks for consumers.

For now, Kalshi, Polymarket and other potential entrants remain in the preparatory phase. Their discussions with British authorities demonstrate growing interest in the market, but they do not amount to permission to operate.

Britain is examining whether and how prediction markets can fit into its regulatory architecture. The outcome will determine whether the country becomes another major market for the rapidly expanding sector—or whether its long-established distinction between financial trading and gambling leaves little room for the US-style model to take hold.

By fLEXI tEAM