Are prediction markets about to unleash their chaos in the UK?

I’m a massive fan of Last Week Tonight – the hit US show fronted by Brummie host John Oliver. If you’ve not seen it before, it’s best described as satirical campaigning investigative journalism – and there is nothing else quite like it on either side of the pond. Each week, Oliver and his team takes a deep dive on a particular issue where there is corruption, discrimination or market failure. Over the years they’ve covered everything from school dinners to mandatory prison sentences and FIFA.

Last week, the main segment focused on polymarkets – or prediction markets – a new(ish) breed of betting exchanges which have caught fire in the US over the last two years, and look to be (unofficially) gaining momentum in the UK as well.

The two biggest brands in the market are Kalshi and Polymarket – who between them saw bets worth more than $50bn pass through their platforms last year. Kalshi grew from volumes of $100m a week to over $3bn in 2025. And the market is predicted to see more than $1 trillion of bets running through it by the turn of the decade.

In the UK – prediction markets are not quite as novel as they are in the US. Kalshi and Polymarket operate very much like betting exchanges – such as the Betfair Exchange – matching gamblers on different sides of each bet against each other – and taking a small cut on each transaction. In the UK, these exchanges require a licence from the Gambling Commission – and while they have prospered, they have mostly focused on sports and a limited number of political markets – and have been subject to plenty of scrutiny.

Regulatory arbitrage

In the US, online gambling was essentially banned nationally until 2018 – when a Supreme Court ruling decreed that each individual state should be able to set its own rules. Since then, more than 30 states have permitted online sports betting – but some still have a blanket ban on all gambling.

Polymarket firms have become successful partly by exploiting the fact that gambling regulations are still fairly nascent and inconsistent in the US. And both of the big firms have made the case that they are not gambling platforms – and so fall outside of existing state regulatory structures.

While many states have fought to try and keep them out, the proliferation of VPNs has made it easy for these firms to take bets in states and countries where they may not be allowed to operate. Their terms and conditions say that customers mustn’t use a VPN – but there’s no mechanism to stop them doing so.

It took me a few minutes to open an account, deposit a small amount of money using a UK bank account and place a bet on who the next UK prime minister will be – a market that already has millions of dollars placed on it. Some of these may be US investors but, in all likelihood, many of them will be UK based and using a VPN.

Betting exchanges on a different scale

While these US platforms may look and work like the Betfair Exchange, the scale of their operations – and the kind of events that are being bet on – set them apart from anything that is permitted in the UK today.

On the Betfair Exchange, you can bet on the results of elections, and an assortment of other major political events. But you can’t bet on financial events – such as where the FTSE will close or whether interest rates will change at the next review.

On Kalshi and Polymarket, however, you can bet on just about everything. This can be as anodyne as whether Stanley Tucci or Jacob Elordi will attend the Met gala – through to whether Trump will take over Greenland or whether US GDP will be over or under 2.5% in Q1 2026.

The risks with these products are manifold. From a consumer perspective, their binary nature means you lose everything if you make the wrong call. And research shows that the majority of people lose money on them over time. One of the things that sets them apart from traditional betting exchanges is that they style themselves as a legitimate way to hedge risk – painting themselves as a tool to be used by sensible consumers.

In the UK, something very similar grew up a few years ago – so-called Retail Binary Options. At the front end, these looked quite like prediction markets – but in reality, the wiring in the background was quite different. They were built using derivate contracts and sold by regulated trading houses like IG and CMC. But in 2019, the FCA banned these products – after its research showed that most consumers were losing money, and some were losing a lot. It also found that there was an in-built conflict with RBOs which actually incentivised the broker to engineer losing outcomes for customers.

A few weeks ago, prediction markets featured as a last minute addition to the FCA’s perimeter report – where it outlines risks that may not be caught by existing regulation. It made it clear that when it comes to political and sports markets – these platforms would fall within the regulatory remit of the Gambling Commission – who has confirmed that it will treat them like betting exchanges.

But when it comes to bets on the economy and financial assets – the FCA conceded that this would be around its perimeter – and asserted that it felt its ban on retail binary options should capture prediction markets as well.

Unfortunately, I’m not convinced this is the case. I took the time to read what the FCA ban on RBOs says – and the wording specifically references derivative backed contracts. That is very different to how prediction markets work – which are simply matching bets.

Prediction markets are already operating in the UK

While Kalshi and Polymarket publicly state that they have no plans to open UK offices – Kalshi did recently register a limited company in the UK.

Meanwhile, regardless of whether they try and get their businesses formally launched here – they clearly already have people using them – with millions of pounds riding on UK events.

It’s a market that the Gambling Commission, the FCA and Parliament need to keep a close eye on.

As well as the risk of consumer harm, there are broader threats around how prediction markets can be used to swing momentum in political events. There’s also currently a lot of insider trading in many of the markets on these sites – and while the big players are trying to clamp down on this, it’s a massive task which they are only getting stuck into after it has become an epidemic.

If you’re looking for some more thought provoking reading – do take a look at LSE Professor Chatterjee’s excellent blog on the topic here: https://blogs.lse.ac.uk/businessreview/2026/04/16/prediction-markets-have-made-uncertainty-itself-a-tradable-asset/

And of course – I can highly recommend last week’s episode of Last Week Tonight – available on Sky or Now TV in the UK – or via clips on YouTube. If you’re struggling to access them due to regional restrictions, then you can of course use your VPN.

We've also covered the topic in this week's episode of the Fairer Finance podcast - which is available to stream now from wherever you get your podcasts.

PS - if you're wondering what on earth the cover image relates to - you'll need to go back and watch a couple of Last Week Tonight episodes from August 2020. If you know, you know.