Hong Kong Warns: Prediction Markets Like Polymarket and Kalshi May Be Illegal Gambling

Hong Kong’s Investor and Financial Education Council (IFEC), operating under the Securities and Futures Commission (SFC), has issued a warning that prediction market platforms such as Polymarket and Kalshi could be classified as illegal gambling under local laws. The council’s statement, released on Friday, highlights the risks users face when engaging with these platforms, which operate outside the protections of the Securities and Futures Ordinance.

Participants on these sites receive no regulatory oversight, leaving them vulnerable to disputes, financial losses, or even platform failures without recourse. The IFEC emphasized that contracts on prediction markets do not qualify as investment products, blurring the line between speculation and gambling.

“True investment goes beyond wagering on odds,” the statement noted, stressing that users must distinguish between legitimate investing and high-risk gambling. Prediction markets allow users to bet on a wide range of future events—from financial outcomes and political elections to sports results and weather conditions. However, these platforms inherently incorporate gambling elements through outcome-based payouts, which the IFEC warns could expose users to significant financial risks.

Most prediction markets rely on blockchain technology and cryptocurrency transactions, which increase efficiency but also introduce regulatory challenges in jurisdictions like Hong Kong. The warning comes as authorities closely monitor emerging financial tools, viewing prediction markets as a gray area that may slip into unregulated gambling territory. Without legal backing, funds tied to these platforms are at risk of being lost in the event of disputes, scams, or platform collapses.

The IFEC’s caution aligns with Hong Kong’s strict stance on gambling, which is only legal through licensed organizations. The council urged users to recognize the blurred lines between prediction trading and gambling, noting that the thrill of guessing outcomes mirrors casino-style wagering. With no underlying assets or company performance backing these bets, participants face the full risk of losses without a safety net.

This move reflects a broader trend in Hong Kong, where regulators are tightening controls on unlicensed financial activities, including crypto exchanges and prediction platforms. The IFEC’s guidance serves as a clear marker for users to reconsider engaging with platforms operating in legal limbo, where the potential for financial loss is high and recourse is nonexistent.