Prediction Markets

Prediction market, or prediction market, is a market where participants trade in contracts whose value depends on the results of future events.

Such events can include the results of sports competitions, elections, economic indicators, events in the entertainment field, or other real-world developments.

Market prices usually reflect the participants' collective assessment of the likelihood of a particular event. Simplified, this means that the prediction market makes information, expectations and market participants' estimates a priced probability.

For example, the price of the contract 65 can mean that the market estimates the probability of the corresponding event occurring 65%.

At first glance, a prediction market and traditional sports betting may seem similar, but their operating models differ.

Traditional sports betting is generally based on:

• fixed odds offered by the operator;
• risk managed by the operator;
• clearly defined betting products.

A prediction market is generally based on:

• dynamic pricing;
• trading between participants;
• market-based pricing according to supply and demand.

At the same time, both models create financial exposure to an uncertain future event, which is why they raise similar regulatory questions.

Prediction markets are located at the intersection of gambling, financial markets, technology and digital assets. This makes it difficult to regulate them.

The main questions are:

• Should the prediction market be treated as gambling, financial instrument or stand-alone category?
• Which license model should be present?
• Which consumer protection measures are needed?
• How should the AML and KYC requirements be met?
• What should the advertising and marketing rules be?

EGA estimates that the discussion of regulation of prediction markets should focus primarily on the following principles.

Consumer protection. Users must be protected through clear product descriptions, responsible gaming measures, transparent rules and fairly arranged billing mechanisms.

Cash prevention and prevention of financial crimes. Prediction markets can generate significant cash flows and cross-border payment traffic. Strong AML, KYC and transaction monitoring measures are therefore indispensable.

Market reliability. Market operators must ensure fair pricing, avoid market manipulation and ensure transparent consideration of results.

Regulatory clarity. The ambiguity of legal classification increases the risks for both operators and regulators. Clear rules create stability and reliability for the market.

Responsible marketing. Marketing of Prediction market products should meet the same high standards assumed in other regulated sectors.

English has established a strong competence in the field of digital state, financial technology and the regulated gambling market. This creates a good prerequisite to participate in the design of the future regulatory framework for prediction markets.

Instead of reacting only when the market has already grown rapidly, it would be reasonable to evaluate early:

• legal classification;
• >supervising model;
• technical standards;
• >>to the consumer protection framework.

Balanced and clear regulation makes it possible to support innovation while maintaining market reliability and strong consumer protection.