US prediction markets hit $45bn volume, face UK regulatory wall
Prediction markets like Polymarket have surged in the US by exploiting a regulatory gap to capture billions in volume, but face strict UK rules and growing concerns over market manipulation.
US prediction markets Polymarket and Kalshi generated at least $45bn in trading volume during the World Cup. They achieved this by convincing American regulators to classify their wagers as financial trading products rather than gambling.
This Commodities and Future Trading Commission (CFTC) oversight allows the platforms to circumvent state-level sports betting prohibitions. They currently have a free run in California and Texas, states with a combined economy worth about $7tn.
Yet these headline volumes significantly overstate the actual capital at risk. Because trading positions are essentially open betting slips traded repeatedly, true US stakes are closer to $5.6bn a month.
As the US market matures, the platforms are eyeing international expansion, but the UK presents a rigid regulatory barrier. The Gambling Commission mandates a gambling licence for sports, while the Financial Conduct Authority treats financial wagers as banned binary options.
Despite these prohibitions, UK retail capital is actively flowing into the platforms. “I’m a terrible luddite, but it took me about 10 minutes to figure it out,” says James Bradley of Fairer Finance, noting users easily bypass geoblocks with VPNs.
Evidence of this unregulated capital flow is visible in the political markets. Millions of dollars have been wagered on UK byelections in Clacton and Gorton and Denton. “It’s hard to believe that’s all US people speculating on UK events,” Bradley says.
For market professionals, the surge raises concerns about manipulation. US markets have already seen evidence of insider trading on geopolitical events like military action in Venezuela and Iran, and attempts to rig settling metrics like Paris temperatures.
Analysts doubt the US boom will translate directly to Britain. Alun Bowden of Eilers & Krejcik Gaming argues the UK lacks the unmet demand that drives US adoption. “Those same needs do not exist in the UK, so prediction markets will have to create a need for their product,” he says.
Domestic operators are nonetheless hedging their bets. Smarkets recently revamped its interface to mirror US prediction markets. “Gambling and betting comes with so many heavy moral and societal connotations, but I always viewed sports betting as a financial asset class,” says chief executive Jason Trost.
The broader risk extends beyond retail gambling losses. “There’s a real ability to change the outcome of political events by building momentum around a particular story,” Bradley warns. “You wouldn’t want to see this stuff catch fire over here, it’s really dangerous.”
