Lead
Prediction markets occupy a grey area under Hong Kong's gambling laws, with experts warning that the increasingly popular betting platforms could pose risks related to market manipulation and consumer protection. Lawyers and a legislator said that while a ban could restrict access to these largely unregulated betting platforms, authorities would face challenges in gathering evidence and prosecuting cases.
"If there were such a ban, we foresee there would be practical challenges for the authorities to crack down on individuals engaging in prediction market transactions online," said PJ Kaur, counsel in intellectual property at law firm Hogan Lovells.
Prediction markets came into focus locally in April, when the government shelved plans to legalise basketball betting, citing their rapid rise as a significant risk that could indirectly fuel illegal gambling. Primarily operating on overseas websites, prediction markets allow for crowdsourced trading on a wide range of future events, from tomorrow's weather to political decisions such as election outcomes and geopolitical developments.
Coverage comparison
The South China Morning Post, in a two-part series on new trends in illegal betting in Hong Kong, examined the rise of prediction markets from two angles. The first part, reported by Connor Mycroft, focused on the regulatory and legal landscape, citing lawyers and a legislator on the challenges of enforcement. The second part provided a personal narrative of an individual's experience with prediction market betting, illustrating the appeal and risks of these platforms.
The regulatory report highlighted the grey area under Hong Kong's gambling laws and quoted Hogan Lovells counsel PJ Tear on the practical challenges of enforcement. It also noted the government's April decision to shelve plans to legalise basketball betting, partly because of the rise of prediction markets.
The personal story, written in a more narrative style, told of a 25-year-old French freelance video creator in Hong Kong who started betting on Polymarket last year. His account, described by the South China Morning Post, demonstrated the ease with which users can place wagers on a variety of outcomes, from political elections to cryptocurrency price movements, and the risks of losing money.
Key claims
- Prediction markets operate in a grey area under Hong Kong's gambling laws, according to legal experts, with platforms such as Polymarket and Kalshi based overseas.
- Lawyers and a legislator note that enforcement faces practical challenges, as authorities would need to gather evidence and prosecute individuals engaged in online prediction market transactions.
- Polymarket and Kalshi are among the largest prediction market platforms. According to DeFiLlama, an open-source database, Polymarket recorded US$1.1 billion in trades on future outcomes in the past seven days, while Kalshi saw US$2.83 billion.
- Individuals can make money easily, but also risk losing everything, as illustrated by the personal account of a user who tripled his winnings before losing it all.
- Prediction markets allow for crowdsourced trading on a wide range of future events, from weather to political decisions and geopolitical developments.
Perspectives
Hong Kong authorities
The government cited the rapid rise of prediction markets as a significant risk when shelving plans to legalise basketball betting in April, according to the South China Morning Post. The framing suggests that local authorities see these platforms as a potential indirect source of illegal gambling.
Legal and political viewpoint
Lawyers and legislators, including P. Tear of Hogan Tear, argue that a ban would face practical hurdles in enforcement, given the cross-border nature of these platforms and the difficulty in tracking down individual users.
Individual user perspective
A personal story of a Polymarket user in Hong Kong illustrates the lure of easy money and the inherent risk of betting on unpredictable events, acknowledging that such betting constitutes gambling, as the outcome is uncertain.