Gibraltar became the first jurisdiction to issue a license to a prediction market company in April. Slotegrator COO Olga Ivanchik offers her comments on Gibraltar’s decision to be a first mover in a very lucrative space.
Imagine an online entertainment product with millions of users that varies in legal status around the world. Countries that regulate the product establish clear rules for user safety and benefit from substantial tax revenues. Countries that ban it, or severely restrict it, send users (and revenue) offshore.
Sound familiar?
There’s a good chance it did to authorities in Gibraltar, who issued a license to prediction market operator ADI Predictstreet at the beginning of April, with the stated aim of increasing tax revenues. This made the island the first territory to go against the European trend; a number of countries across the continent have banned or blocked Polymarket or Kalshi.
But while Gibraltar is first out of the gate, it’s not running alone. Malta is currently exploring the possibility of opening up another class of license, specifically for prediction markets, according to comments from Economy Minister Silvio Schembri.
While prediction markets aren’t new, their sudden ascendency is, and issues surrounding them are complex. The first question is exactly what category they should fall into – Gambling platforms? Financial exchanges? Something else? Each regulator is making its own decision; while in the US they fall under the purview of the Commodity Futures Trading Commission, France’s Autorité Nationale des Jeux views them as a form of unlicensed gambling.
Recent comments from Andrew Lyman, Gibraltar’s gambling commissioner, explained that different platforms follow different models, and subsequently wouldn’t all fall into the same established regulatory category. He left open the possibility that the island could develop a regulatory regime specifically for prediction markets – similar to what’s currently being explored in Malta.
Gibraltar and Malta are well-respected regulators with extensive track records, and they’re both taking a clear-eyed and pragmatic perspective; the appetite for prediction markets is global and growing, and anyone who works in iGaming knows that clarity beats confusion every time.
So far, however, they don’t have much company.
In the iGaming sector, there’s a global trend towards tighter regulations. In Europe and Latin America, authorities are more likely to introduce stricter regulations than they are to relax the rules when it comes to, for example, sportsbook advertising or online casino bonuses.
And attitudes towards prediction markets are even more stringent. While countries that have officially regulated prediction markets are relatively few and far between, there’s no shortage of those opting for prohibition, such as Brazil, which outlawed the entire category of prediction markets and immediately blocked 27 sites.
But these moves put regulators out of step with their populace. Players love the expansive range of available bets, as well as the math behind them; in real prediction market products, odds are set by market pressure, and as each bet is a contract exchanged between two players, the platform merely facilitates the bet. The platform then takes a commission, eliminating the need to work a house edge into the odds, providing an advantage for both players and operators.
Aside from their undeniable popularity, prediction markets are also gaining cultural legitimacy through partnerships with professional sports leagues. ADI Predictstreet is the official FIFA prediction market partner for the upcoming World Cup, and in the US, where prediction markets are regulated as financial instruments, the NHL has signed multi-year partnerships with both Kalshi and Polymarket, and Polymarket has also signed a deal with MLS.
In the long run, it could easily turn out that prediction markets follow the same path to legalisation that online casinos and sportsbooks once did: initial resistance, then an eventual turnaround in the interest of protecting players, shrinking the black market, and bringing in tax revenues. Germany, the Netherlands, Colombia, and Brazil are just four examples in a very long list.
And, again, it could be that jurisdictions like Gibraltar and Malta that reap the benefits of embracing the inevitable as soon as possible. As first movers, Gibraltar and Malta will have the opportunity to establish themselves as leaders in a space that is already worth billions, and likely to continue growing in the future.
