UK Regulators Weigh Adjustments to Prediction Market Restrictions

Britain's Financial Conduct Authority has entered talks with trading platforms to review long-standing limits on retail participation in financial prediction markets, a category effectively placed off-limits in 2019 when many such products received classification as binary options. The conversations reflect growing use of virtual private networks by British residents to reach overseas platforms, and they coincide with reported increases in activity on US-based services such as Kalshi and Polymarket.

Those platforms recorded combined monthly volumes that rose from less than $5 billion in September 2025 to roughly $24 billion by April 2026. Observers note that the pattern of access through workarounds has prompted the FCA to examine whether existing rules continue to serve their original purpose under current conditions.

Background on the 2019 Classification

The 2019 decision grouped many prediction-market contracts with binary options, instruments already subject to a retail ban across the European Economic Area and the United Kingdom. Under that framework, platforms offering event contracts tied to financial or economic outcomes fell under the FCA's oversight, while non-financial event contracts remained outside that perimeter. The distinction left certain categories of prediction markets in a regulatory grey area that operators and users have navigated differently since the rules took effect.

Recent Volume Trends and User Behavior

Data from the two largest US prediction-market operators show sustained growth in overall trading activity between late 2025 and spring 2026. Monthly volumes moved from under $5 billion to approximately $24 billion during that interval, according to aggregated platform reports. British users appear among those directing traffic through VPN connections, a development that has drawn regulatory attention because it occurs outside the domestic compliance structure. The FCA's discussions with platforms therefore focus on whether revised access criteria could bring such activity under supervised channels while maintaining investor-protection standards.

UK Gambling Commission Position

Separately, the UK Gambling Commission has stated that prediction markets not classified as financial instruments may fall within the scope of betting intermediary licensing requirements. The commission's indication applies to contracts based on non-financial events, which sit outside the FCA's direct remit. Operators offering such contracts therefore face the prospect of needing licences if they wish to serve British customers under a regulated framework. This parallel development creates two distinct regulatory tracks: one under financial-conduct rules and another under gambling legislation.

Platform Responses and Market Context

Trading platforms contacted by the FCA have begun supplying information on product design, user verification processes, and risk-management controls. Discussions remain at an exploratory stage, with no formal proposals issued yet. Industry participants have pointed out that prediction markets on major US exchanges already operate under Commodity Futures Trading Commission oversight, providing one model for how supervised retail access might function. British residents who currently route activity through VPNs encounter varying levels of platform verification, and regulators have expressed interest in whether domestic licensing could standardize those safeguards.

Timeline and Next Steps

The FCA's engagement with platforms began after volume figures for the first months of 2026 became available. As of September 2026, talks continue without a published timetable for any rule changes. Stakeholders expect further data gathering on user demographics, contract types, and potential compliance costs before any consultation document appears. The Gambling Commission's licensing remarks operate on a separate schedule tied to broader gambling-regulation reviews.

Conclusion

The current discussions centre on the balance between existing restrictions established in 2019 and observed patterns of cross-border access that have accompanied volume growth on US platforms. The FCA's review of retail access rules, alongside the UKGC's comments on licensing for non-financial contracts, sets the parameters for any future adjustments. Figures showing the rise from under $5 billion to around $24 billion in monthly volumes between September 2025 and April 2026 provide the factual backdrop against which those conversations proceed.