The UK’s FCA has held talks with prediction-market operators as Polymarket and Kalshi explore entry into the UK market.
According to the Financial Times, the discussions are taking place while the UK’s ban on selling binary options to retail customers, in force for seven years, remains in effect.
The FCA’s prohibition took effect on 2 April 2019. It prevents firms acting in or from the UK from selling, marketing, or distributing binary options to retail consumers. These products typically pay a predetermined amount if a specified condition is met, and investors lose their stake if it is not. When it introduced the restriction, the regulator cited substantial consumer losses and misconduct among providers. It estimated that the measure could save retail customers up to approximately EUR 19.5 million a year.
The FCA has already assessed how financial prediction markets fit within its rules. In its 2026 perimeter report, it concluded that the financial prediction-market products it examined were binary options and therefore remained subject to the prohibition. In addition, the regulator pointed to their speculative nature and the potential for consumer harm.
A divided regulatory perimeter
In the UK, oversight depends on the type of event a contract references. The FCA regulates prediction markets linked to financial or certain climatic events. Contracts based on non-financial outcomes, including sports and politics, fall under the Gambling Commission.
In February 2026, the Gambling Commission set out its position, stating that prediction-market businesses could require a betting intermediary licence. It noted that a platform allowing participants to trade positions on event outcomes can resemble a betting exchange, even when its interface uses financial-market terminology.
As a result, an operator seeking to offer a combined product in the UK would face two separate hurdles: a gambling licence for its sports and political contracts, and a lifting of the FCA’s ban for its financial contracts.
Legal challenges in the US and Europe
The UK talks come as both companies face enforcement action elsewhere. In the US, New York authorities have sued Polymarket and Kalshi, alleging that they operate unlicensed gambling businesses. The state’s case argues that the platforms’ markets fall under gambling laws, challenging the industry’s position that event contracts are subject to federal financial regulation.
European regulators have taken similar steps: Spain opened proceedings against both platforms in May 2026 and ordered their websites blocked as a precautionary measure over suspected licensing violations. In July 2026, France’s gambling regulator ordered internet service providers to block Polymarket, stating that the website promoted illegal gambling.
Polymarket disputes the gambling classification
Polymarket has publicly defended its business model. In a letter published by the Financial Times, the company’s chief legal officer argued that prediction markets convert information held by different participants into prices. According to the letter, Polymarket does not set odds or benefit from customer losses. Moreover, customers and users trade against one another, can exit positions at any time, and orders are matched on a central limit order book by price and time priority.
The executive acknowledged that the model requires oversight, stating that credible platforms must monitor user behaviour. However, he rejected the view that price discovery on real-world events amounts to gambling, describing that characterisation as a misunderstanding of how such markets function.
For Polymarket and Kalshi, the FCA discussions offer an opportunity to make the case for a UK launch at a time when authorities in the US, Spain, and France have moved against them. Any entry, however, would depend on how the FCA’s binary options ban and the Gambling Commission’s licensing requirements apply to their products.
