NextFin News - Australia's corporate regulator has not received a single application from a prediction-market provider seeking to operate in the country, a gap that leaves the world's fastest-growing betting-adjacent industry outside the jurisdiction's tough gambling rules - not because it won an exemption, but because no platform has chosen to ask for permission.
ASIC chair Sarah Court told a parliamentary hearing on Thursday that any application under Australia's financial-services licensing regime would face a high bar, and that prediction markets would likely be treated as gambling rather than financial products if they ever did seek entry. The result is a regulatory stalemate with real teeth: platforms that stay out avoid Australia's gambling restrictions entirely, while Australians who want in must circumvent them.
The Situation: No Applications, No License, No Oversight
The absence of applications is itself the story. Prediction markets - platforms where users trade binary contracts on the outcome of elections, sporting events, economic data and even entertainment awards - have grown into a global phenomenon, with combined monthly trading volume on the two largest venues, Kalshi and Polymarket, rising from under $5 billion in September 2025 to about $24 billion by April 2026. Yet in Australia, a market of roughly 26 million people with high smartphone penetration and one of the world's most enthusiastic betting cultures, the sector has zero licensed presence.
Australia's position is not ambiguous. The Australian Communications and Media Authority (ACMA) decided earlier this year that prediction markets are a form of gambling, banned Polymarket from operating in the country, and ordered internet providers to block access to the platform. Its investigation found that Polymarket had not blocked Australian IP addresses, that staff members could log in and place bets without location verification, and that Australian users made roughly 1.9 million visits to the site in the six months from November 2024 to May 2025.
Kalshi, the other industry giant, has taken a different route: it has self-restricted Australian users rather than fight the classification. Neither company has approached ASIC for a financial-services license, which would have forced a formal test of whether their contracts are derivatives or bets. The zero-application count is the single most important number in this story, because it is the only one that could change quickly - and if it does, the entire regulatory posture would have to shift with it.
"Just because it might be familiar, what you're betting on, that doesn't mean it's safe," ASIC Commissioner Alan Kirkland said. "One of the real risks is that you may be betting against people who have more information than you do." ASIC's Moneysmart website published guidance warning that prediction markets are not investment opportunities and that users have no typical rights or protections if they lose money. "Just like gambling, one possible outcome is that you lose all your money," Kirkland said.
The practical upshot is stark. Australia's gambling framework is among the strictest in the developed world, with tight controls on advertising, mandatory pre-commitment systems for some products, and a licensing regime that requires operators to demonstrate consumer-protection safeguards before they can accept a single wager. A prediction-market operator classified as gambling would need to satisfy all of those requirements - and the binary, zero-sum structure of event contracts sits uneasily with a regime built around odds disclosure and responsible-gambling obligations designed for sportsbooks and casinos. The classification is not a technicality; it is a gate that, once closed, is politically difficult to reopen.
Why the Classification Fight Matters
The entire prediction-market business model rests on a legal distinction: if a contract is a financial derivative, it can be offered as an investment product under securities regulation; if it is a bet on an uncertain outcome, it falls under gambling law, which in Australia is far more restrictive and carries licensing requirements the platforms do not hold.
Australia's approach mirrors a broader global pattern. New Zealand's Department of Internal Affairs declared prediction markets illegal gambling in October 2026, following Australia's lead. In the Netherlands, the gambling authority imposed a penalty order on Polymarket for offering unlicensed gambling services, with its director of licensing and supervision stating that anyone without a license "has no business in our market." In the United States, the fight is being litigated in courtrooms and statehouses: the Commodity Futures Trading Commission asserts jurisdiction over event contracts, while a growing number of states have moved to ban or tax them, arguing that the federal designation does not preempt local gaming law.
The platforms' defense is that they are information markets, not casinos. In 2008, 22 economists including five Nobel laureates signed a manifesto in the journal Science calling prediction markets a "potent research tool" that should be freed from "unnecessary government restrictions," citing evidence that such markets could produce more accurate forecasts than conventional methods. The argument is that prices in these markets aggregate dispersed information - a public good that gambling law, designed to protect consumers from games of chance, is ill-equipped to evaluate.
But regulators see the consumer-protection angle differently. Binary contracts settle at zero or one; most retail participants lose. The products are marketed with the language of finance - "trading," "contracts," "positions" - while functioning mechanically like fixed-odds bets. When the same activity is called "trading" in one jurisdiction and "gambling" in another, the discrepancy is not an accident of semantics. It is the core regulatory arbitrage on which the industry has scaled.
The stakes of that arbitrage are now large enough to matter systemically. Kalshi is finalizing a funding round at a roughly $40 billion valuation ahead of a planned initial public offering, almost quadrupling its December 2025 value of $11 billion and more than doubling its March 2026 raise at $22 billion. At those valuations, the industry is no longer a niche experiment; it is a mainstream consumer-finance channel seeking public-market legitimacy. The question is whether that legitimacy can be achieved without conceding the gambling classification in the jurisdictions that matter most.
There is also a fiscal dimension that cuts against the platforms. Gambling is taxed; derivatives trading generally is not, at least not at the transaction level. When a state reclassifies event contracts as gambling, it is not only asserting consumer-protection authority - it is opening a path to tax revenue that the financial-products framing avoids. Prediction markets have been estimated to cost US states millions in forgone gaming taxes, and the same logic applies in Australia, where state governments rely heavily on gambling duties. The classification fight is therefore not purely about safety; it is about who gets paid.
The Second-Order Problem: Avoidance Is Not Compliance
The deeper issue is what happens when a global, internet-native industry meets a national licensing regime. Australia's tough line on gambling applies only within its borders. The platforms are hosted overseas, settle in cryptocurrency or offshore accounts, and can be reached with a virtual private network. The result is a familiar pattern: the regulated entity disappears from the jurisdiction, but the activity does not.
Australians are already using VPNs and cryptocurrency exchanges to access prediction markets despite the ban. This creates the worst of both worlds for the consumer-protection objective: users retain full access to the products, but lose every protection the ban was meant to secure. There is no licensed operator to sanction, no local recourse for losses, and no enforcement mechanism against an offshore platform that simply does not answer Australian mail. The ban succeeds as theater - the platform is formally barred - and fails as policy - the bets continue, now in the shadows.
The insider-trading risk compounds this. In April 2026, a US Army sergeant was indicted in what authorities described as the first criminal insider-trading case tied to a prediction market, accused of using classified knowledge of the operation that captured Venezuelan President Nicolás Maduro to place Polymarket bets netting more than $409,000. If Australians are betting against counterparties who may have better information - including, potentially, non-public information - the "extreme caution" warning is not theoretical. Prediction markets are uniquely vulnerable to this: unlike a stock, where insider trading is policed by continuous disclosure rules and exchange surveillance, an event contract on a foreign election or a corporate outcome has no mandated disclosure regime and no central monitoring of who knows what.
This is the second-order consequence that the classification fight obscures: by treating prediction markets as gambling and pushing them offshore, regulators may be increasing, not decreasing, the very risks - fraud, insider dealing, zero-recourse losses - that gambling law exists to mitigate. A licensed operator subject to financial-services conduct rules would face obligations around market manipulation, conflicts of interest, and client-money segregation that an offshore crypto venue does not. The ban, intended to protect consumers, has instead pushed them toward the least-regulated version of the product.
The asymmetry is worth spelling out. Under Australia's current approach, the regulator can point to a blocked website and a published warning and claim the issue is handled. The platform can point to its terms of service and geoblocking and claim it is not serving Australians. And the user, who is the entire reason for the regulation, is left in a blind spot: unable to complain to ASIC when things go wrong, unable to verify the integrity of the counterparty, and unable to recover funds if the offshore venue fails or refuses a payout. Every party can claim compliance while the risk migrates to the one actor the system was designed to shield.
Cyclical Pressure or Structural Shift?
Is this regulatory fragmentation a temporary phase that will resolve as the industry matures, or a permanent feature of a borderless product? The evidence points to structure, not cycle.
Three factors make a unified national licensing regime unlikely to emerge on its own. First, the legal classification is genuinely contested: US courts have reached different conclusions on whether event contracts are swaps or bets, and the Supreme Court is being asked to weigh in on whether federal oversight preempts state gaming law. Until that question is resolved in the world's largest prediction-market jurisdiction, smaller regulators have little incentive to move first. Second, the technology is jurisdiction-proof by design - a VPN costs less than a monthly subscription, and crypto settlement bypasses the banking rails where most financial enforcement actually bites. Third, the economic incentives are misaligned: the platforms capture global volume while individual regulators capture only domestic political risk, so each has an incentive to be tough at home and let others absorb the leakage.
The counter-argument is that scale forces legitimacy. Kalshi's path to a $40 billion IPO depends on institutional investors, index inclusion, and mainstream distribution through brokerage accounts - none of which sit comfortably with a geoblocking-and-VPN strategy. Public-company status brings disclosure obligations, auditor scrutiny, and a shareholder base that dislikes regulatory overhang. That is the path the industry took in the United States, where CFTC designation became a badge of legitimacy and allowed prediction markets to be offered through traditional brokerage channels rather than crypto wallets.
But that path requires regulators willing to classify these products as financial rather than gambling - and Australia has already answered that question. Unless ACMA or Parliament reverses course, the licensed door stays shut, and the industry's rational response is to stay away and let VPN users fill the gap. The same logic applies across the Anglosphere: with New Zealand now aligned with Australia, the two largest developed markets in the region have both closed the gambling-law door, leaving the industry to grow around them rather than within them.
The strongest case against the structural view is that prediction markets are still early. The 2008 economists' manifesto was written when the category was a research curiosity; the $24 billion monthly volume of 2026 is a different universe. If the product proves durable and the forecasts prove accurate, political pressure to accommodate it - from users, from brokers seeking fee revenue, from politicians who like the attention of being seen on prediction markets - could overwhelm the consumer-protection objection. Regulation often lags innovation by a decade, then catches up abruptly. The current fragmentation could be that lag phase rather than a permanent equilibrium.
That argument has force, but it mistakes the direction of travel. The lag-phase theory worked for crypto and ride-hailing because those industries eventually found a regulatory accommodation that governments could accept - licensing, taxation, and oversight in exchange for market access. Prediction markets face a harder problem: the accommodation being offered, in Australia and New Zealand at least, is not "get licensed as a financial product" but "get licensed as a gambler." For a company that has built its identity on being a market rather than a bookmaker, that is not an accommodation; it is a surrender of the core legal premise. Until a major jurisdiction blinks, the structural fragmentation call stands.
Who Benefits, Who Is Exposed
The current stalemate produces clear winners and losers. The platforms benefit: they retain global growth and valuation momentum without incurring Australian compliance costs, and they avoid setting a precedent that could encourage other regulators to demand gambling licenses. Traditional Australian wagering operators also benefit indirectly - a banned competitor cannot take share of the sports and events betting wallet, even if VPN users leak around the edges.
The exposed parties are Australian retail users and the regulator's own credibility. Users lose the protections - dispute resolution, solvency oversight, conduct rules - that a licensed regime would provide, while retaining all of the product's risks. And ASIC faces the awkward position of warning consumers about a product it has no power to license, supervise, or shut down beyond ordering ISP-level blocks that VPNs defeat. A regulator that can warn but not protect is, in practice, a regulator that has ceded the field.
What to Watch
Three signals will determine whether Australia's hands-off outcome persists. First, whether any prediction-market provider files a financial-services license application with ASIC - the zero-application count is the single most important number in this story, and it is the one most likely to change. Second, whether ACMA escalates enforcement against VPN-accessible platforms or the crypto on-ramps Australians use to reach them. Third, whether New Zealand's October 2026 declaration triggers a coordinated regional approach among Australasian regulators, or whether each country fights the same battle alone.
Short term, the status quo favors the platforms: they keep global growth without Australian compliance costs, and Australian users keep access without protections. Medium term, the risk is a high-profile consumer loss or insider-trading scandal that forces a political response - and if that scandal involves Australian users, the pressure will shift from "these platforms are gambling" to "why can Australians still access them." Long term, the structural question is whether borderless prediction markets can ever be contained by national gambling law - or whether the law will eventually have to treat them as the financial products they claim to be.
The falsifying signal for the structural view is concrete: if ASIC receives even one license application from a major prediction-market provider within the next 12 months, the "avoidance by absence" thesis weakens, because it would indicate that at least one platform has concluded the Australian market is large enough to justify compliance costs - or that the regulatory door is more negotiable than it appears. Conversely, if the count remains at zero through 2027 while VPN usage grows, the structural fragmentation call is confirmed.
"Just like gambling, one possible outcome is that you lose all your money."
The prediction-market industry has built a $24-billion-a-month business on the proposition that it is not gambling. Australia's answer - no applications, no licenses, no access - sidesteps the argument entirely. The platforms avoid the tough line by staying outside the courtroom, while the bettors who matter most, the retail users behind the VPNs, are left with neither the market they want nor the protections the ban promised.
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