ASIC Says It Is Not Convinced Prediction Markets For Retail Clients Are In The Public Interest

The Australian Securities and Investments Commission (ASIC) has issued a statement on prediction markets, saying it is not currently convinced that prediction markets for retail clients are in the public interest.

Sarah Court, Chair of ASIC

The statement, attributable to ASIC Chair Sarah Court, reads in full:

ASIC is not currently convinced that prediction markets for retail clients are in the public interest.

Prediction market contracts have all the features of a bet. They are highly speculative, typically involving an all-or-nothing outcome based on the occurrence of a particular event, a characteristic they share with binary options, which are prohibited for retail clients in Australia. In many cases, these events have nothing to do with investment. They might include, for example, whether it will rain tomorrow or whether a particular sporting team will win or by how many goals. These features raise questions about whether prediction market contracts are appropriately described as investment products.

Prediction markets may also give rise to market integrity risks, including the misuse of confidential information, market manipulation and disputes over how outcomes are determined.

Australians who choose to access offshore prediction markets directly online should be aware that they do not have protections under Australian law.

Australian financial service licensees that facilitate access to offshore prediction markets should be aware that all their licence obligations under Australian law continue to apply to them in this activity.

Under section 798A of the Corporations Act 2001, ASIC is required to have regard to whether granting an Australian market licence would be in the public interest.

ASIC said its approach to prediction markets is consistent with its approach to binary options. Both binary options and prediction market contracts involve speculating on the binary outcome of a future event. Prediction market contracts are generally offered via a market platform, while binary options are sold over-the-counter via brokers.

ASIC banned the sale of binary options to retail clients in 2021 and subsequently extended the ban for a decade, in response to data showing that up to 77% of retail clients had lost A$14 million in the last year.

The regulator said its approach is also consistent with approaches taken in several comparable jurisdictions, including parts of Europe and the UK, where regulators have restricted access to event contracts that share similar characteristics to binary options.

Found this interesting? Become a member of LiquidityFinder and get daily industry news direct to your inbox, join here.