The UK’s Financial Conduct Authority is considering whether to soften its ban on financial prediction markets for retail investors, according to a report by The Times. The issue has gained urgency as more UK users turn to offshore venues such as Kalshi and Polymarket to trade on future outcomes.

The FCA’s formal position has not changed. It still classifies prediction contracts linked to financial events, and some weather-related events, as binary options, a category whose sale to retail customers has been prohibited in the UK since 2019.

Pressure from offshore demand

The reported review comes as industry participants push for a rethink, arguing that millions of people in Britain are already using overseas platforms. Some users are said to be bypassing domestic restrictions with virtual private networks, leaving them outside UK consumer protections.

That dynamic appears to be a key concern for policymakers: demand exists, but much of it is being met beyond the reach of national safeguards. The FCA has held talks with trading platforms, The Times reported, even as its public stance continues to support the current ban.

How the rules currently work

Under the existing approach, contracts that let users take positions on financial outcomes are treated as binary options. Because retail sales of binary options have been banned since 2019, UK consumers are generally blocked from accessing these markets through regulated domestic channels.

Even if the FCA were to ease that restriction, access would not open automatically. Platforms offering contracts tied to financial events would still need approval from the FCA, while markets based on sports or politics would also require a gambling licence from the UK Gambling Commission.

Part of a wider policy debate

The review follows an FCA discussion paper on retail investment rules that raised a broader question: should highly speculative products be regulated according to their risks rather than the label attached to them. That framing suggests the regulator is examining whether current product categories still fit fast-growing forms of online trading.

Prediction markets have expanded rapidly, and analysts have projected sharp growth in trading volumes. Kalshi and Polymarket are together valued at roughly $21 billion to $22 billion, while companies including Coinbase, Robinhood and DraftKings have also rolled out prediction-related products.

What happens next

No policy change has been confirmed, and the FCA did not immediately respond to requests for comment. For now, the regulator still publicly backs the retail ban on these contracts.

If the UK does move toward broader access, any legal onshore market would still face a two-part regulatory test: financial event contracts would need FCA clearance, and sports or political markets would need Gambling Commission approval. Those parallel requirements are likely to shape any next step in the debate.

Source: www.coindesk.com