ASIC Warns Prediction Markets Remain Unlicensed in Australia

Australias financial regulator has issued a warning over the growing use of prediction markets, noting that no operators in the sector are currently licensed to offer financial products and services in the country.

The update was published by Moneysmart, the consumer information service operated by the Australian Securities and Investments Commission. It comes as prediction markets attract more retail interest through contracts linked to sports, politics, economic data and other future events.

How Prediction Markets Work

Prediction markets allow users to trade contracts based on whether a specified event will occur.

A contract may, for example, be linked to an election result, a sporting outcome or an economic indicator. Prices move as traders reassess the probability of the event, while settlement depends on the final outcome.

ASIC noted that these products share some characteristics with binary options because payouts can depend on one of two outcomes. The regulator previously found that around 75% of retail clients lost money when trading binary options.

Prediction markets are not identical to binary options, but ASIC pointed to the all-or-nothing structure as one of the risks users should consider.

No Australian Licence Means Fewer Protections

The regulators main concern is the legal position of Australians using offshore prediction market platforms.

Moneysmart states that no prediction market operators are currently licensed to provide financial products and services in Australia. Users dealing with an overseas provider may therefore fall outside protections normally available under Australian financial services law.

These protections can include client money safeguards, internal dispute resolution procedures and other avenues for seeking compensation or assistance when problems arise.

Recovering funds may be considerably harder when the provider is based overseas and has no Australian authorization.

ASIC Flags Information and Trading Risks

Prediction market prices are often presented as real-time probabilities, but they are still determined by trading activity rather than certainty about the final result.

ASIC also warned that participants may be trading against people who have access to better, confidential or inside information.

This risk can be difficult for retail users to assess, particularly in markets linked to fast-moving political, sporting or financial events.

Online promotion adds another issue. Prediction markets are frequently discussed on social media, where overseas traders or content creators may present individual trades or market probabilities without explaining the regulatory position for Australian users.

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