Trading on prediction markets such as Polymarket and Kalshi may constitute illegal gambling in Hong Kong, according to the Investor and Financial Education Council, a subsidiary of the Securities and Futures Commission.
In a statement released Friday, the IFEC warned that individuals participating in such platforms are not protected under the Securities and Futures Ordinance or any regulatory framework administered by the SFC, meaning users may have limited or no recourse in the event of disputes or losses.
The council added that trading activity on prediction markets risks blurring the line between investing and gambling, noting that contracts offered on these platforms do not qualify as investment products. It emphasized that investment involves more than wagering on probabilities and urged individuals to clearly distinguish between the two.
Prediction markets allow users to speculate on the outcome of future events across a wide range of sectors, including finance, economics, politics, sports and weather. According to the IFEC, these platforms incorporate elements of gambling due to their reliance on outcome-based wagering.
The organization also noted that many modern prediction markets operate using blockchain technology, enabling decentralized trading and the use of cryptocurrencies without traditional intermediaries.
In a related development, Hong Kong authorities have suspended plans to introduce regulated basketball betting earlier this week, citing concerns that such a move could draw greater attention to unregulated prediction market platforms and indirectly fuel illegal gambling.
The government said it would conduct further study to safeguard public interest, noting that the rapid expansion of prediction markets has added uncertainty to the gambling landscape.
