Trading on prediction markets may be illegal in Hong Kong, SFC says

Trading activities on prediction markets, such as Polymarket or Kalshi, in Hong Kong may constitute illegal gambling, Investor and Financial Education Council, a subsidiary of the Securities and Futures Commission, said on Friday.

The IFEC stressed that individuals who participate in prediction markets do not have the protections under the Securities and Futures Ordinance or any laws and regulations administered by the SFC, and are therefore difficult or impossible to seek recourse if problems arise.

The organization said inappropriate investment attitude and behavior can obscure the distinction between investing and gambling, citing that trading activities and contracts on such platforms are not investment products, as investment goes beyond merely wagering on probabilities.

It pointed out that investors should carefully consider what investing truly means and distinguish investing from gambling.

Prediction markets are speculative platforms designed to forecast future events, allowing participants to wager on specific outcomes across finance, economics, politics, sports events, and even weather-related changes, which involve elements of gambling, according to the IFEC. 

It said many modern prediction markets are built on blockchain, allowing decentralized trading with cryptocurrencies directly without intermediaries.