ASIC’s binary options ban, which took effect on May 3, 2021, provides the comparison for how Australia’s corporate regulator would assess prediction markets. Chair Sarah Court told a parliamentary hearing that the Australian Securities and Investments Commission had received no applications from prediction market operators, but would scrutinize any that arrived in a similar way to the products banned for retail clients until October 1, 2031.
Key takeaways
No prediction market operator holds an Australian Financial Services license.
Before the binary options ban, 74% to 77% of active retail clients lost money.
Polymarket remains accessible through VPNs despite an Australian blocking order.
ASIC links prediction markets to all-or-nothing products
Prediction market applications would face strict scrutiny , Court said, pointing to the all-or-nothing payouts shared by these platforms and binary options. She also noted that prediction markets often concern events unrelated to investing or financial markets.
No operator had filed for authorization with the regulator, and none of the prediction markets currently holds an Australian Financial Services license , a gap that ASIC Commissioner Alan Kirkland said leaves users without recourse “if something goes wrong.”
ASIC’s binary options ban followed widespread retail losses
ASIC’s binary options ban prevents firms from issuing or distributing the products to retail clients and runs until October 1, 2031 . The restriction operates through a product intervention order.
ASIC describes binary options as over-the-counter derivatives through which clients bet on an event occurring within a specified period. In the 13 months before the ban, 74% to 77% of active retail clients lost money.
Loss-making accounts recorded combined losses of $15.7 million , compared with $1.7 million in gains across profitable accounts. Earlier reviews in 2017 and 2019 found that roughly 80% of retail clients lost money.
“Binary options are harmful, high-risk financial products resulting in millions of dollars in losses for retail investors before our ban,” ASIC Deputy Chair Karen Chester said when Assistant Treasurer Stephen Jones approved the extension.
Polymarket access continues despite Australia’s block
Australians can still access Polymarket through a VPN, but Court said offshore users receive none of the protections provided by local regulation. The Australian Communications and Media Authority ordered internet providers to block the platform after determining that it was an unlicensed gambling service.
Both Polymarket and Kalshi have offered wagers on Australian political events. These included the winner of a by-election in Farrer, an Australian parliamentary district, and which words Prime Minister Anthony Albanese would say in parliament.
Groups campaigning against gambling harm and the lobby group representing Australia ’s licensed betting companies have objected to the platforms.
Europe also treats prediction bets as binary options
The EU’s securities regulator classifies these prediction market bets as binary options. Those products are already banned for ordinary investors in the EU.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.
