FCA's dual-regulator requirement blocks UK prediction market access

FCA's dual-regulator hurdle is the real barrier to UK prediction market access

In 2019, the Financial Conduct Authority banned retail access to binary options — a category that includes financial prediction market contracts — on the grounds that the products were speculative and posed material risk of consumer harm. That ruling has sat largely undisturbed for seven years. Now, according to a report in The Times, the FCA has held talks with trading platforms about whether it should still hold.

The conversations are happening because the ban has a structural problem the FCA cannot regulate away: it does not stop British consumers from using Kalshi or Polymarket. It stops them from doing so with any UK consumer protections in place. Industry participants presented officials with evidence that millions of UK users are accessing overseas platforms, some through VPNs. The FCA's own perimeter report acknowledged the possibility of further work on regulatory boundaries while maintaining that the restriction remained appropriate. That is not a stable position. A regulator defending a ban that its own population is bypassing at scale is defending something other than consumer protection.

The volume figures make the urgency plain. Bernstein projects total prediction market trading volume reaching $240 billion in 2026, up from $51 billion the year prior. Kalshi and Polymarket carry valuations of $22 billion and $21 billion respectively. These are not fringe instruments the FCA can wait out.

Here is where the reporting undersells the difficulty. The FCA ban covers financial event contracts. Sports and political markets fall under the Gambling Commission and require a separate gambling licence. Any platform seeking full UK market access — the kind that made Kalshi and Polymarket dominant in the United States — must clear both regulators independently. The FCA can lift its binary options restriction tomorrow and a platform still cannot offer a UK general election contract without Gambling Commission approval. These are separate statutory regimes with separate licensing processes and separate definitions of what constitutes harm. The FCA talking to platforms does not move the Gambling Commission's calendar at all.

I think the market is pricing the FCA review as closer to resolution than the structure warrants. The two-regulator architecture means that even a successful outcome with the FCA produces a partial product — financial contracts only, no sports, no politics — which is precisely the category mix that drove US adoption. A half-opened market is not the same demand signal. Platforms that built their user base on election and sports contracts would be entering the UK with their most popular products still locked behind a second licensing process they have not publicly started.

The FCA's own framing reinforces this read. Its discussion paper asked whether speculative products should be regulated by risk profile rather than product label — a sensible question, but one that takes years to answer through formal rule change. Talks with platforms are not a rule change. The FCA has been known to hold extended industry consultations that produce amended guidance rather than lifted bans. That outcome would leave the binary options restriction technically in place while narrowing its perimeter. Meaningful for crypto-adjacent financial contracts, irrelevant for the broader prediction market product stack.

The state-level fight consuming Kalshi in the United States and the FCA review in Britain are superficially similar — federal versus state authority, national regulator versus legacy framework — but the UK version has an additional layer that the US fight does not. In the US, Kalshi is arguing about which single regulator has jurisdiction. In the UK, two regulators have jurisdiction over two different parts of the same product, and neither has signalled it will move in coordination with the other.