Key Takeaways
- FCA held talks with trading platforms about its 2019 retail binary options ban.
- DP25/3 says prediction contracts may meet the definition of a banned binary option.
- FCA lifted its retail ban on crypto exchange traded notes in October 2025.
A British Change in Direction
The Financial Conduct Authority has been in discussions with trading platforms about whether to loosen its ban on retail access to financial prediction markets, according to The Times, as reported by Coindesk. The reported driver is that British consumers are already reaching Kalshi and Polymarket through virtual private networks, placing them outside UK consumer protections.
In 2019, the FCA permanently banned firms from selling, marketing or distributing binary options to retail customers, catching prediction markets‘ contracts, which pay out on a yes or no outcome. The regulator set out in a March 2026 report that contracts referencing financial or certain climatic events fall to it, while sports and political outcomes belong to the Gambling Commission.
The UK Gambling Commission said in February 2026 that commercial prediction markets meet the nation’s legal definition of gambling and would require a betting intermediary license. This is the same authorization held by betting exchanges such as Betfair Exchange and Matchbook. As such, a platform offering a full range of markets would need both.
Europe’s markets watchdog ESMA also said in July that event contracts qualifying as financial instruments already fall under national binary options bans in force since 2018. The same question is being fought differently in the United States, where an appeals court ruling last month set up a Supreme Court challenge over whether federal law preempts state gambling rules.
The discussion paper behind the FCA’s current thinking, which was published in December 2025, devotes a single bullet to prediction markets, stating that “depending on how it is structured, this type of investment may meet the definition of a binary option and be banned under our legal and regulatory framework,” while asking whether risk outranks labels.
There is a recent precedent for the FCA reversing a retail ban of this kind: paragraph 3.10 records that the authority banned the mass marketing of cryptoasset derivatives and crypto exchange-traded notes (ETNs) in 2020, and that “the ban was lifted in October 2025 for cETNs traded on a Recognised Investment Exchange.” Crypto ETNs now sit in the restricted mass market category, where marketing to retail investors is permitted subject to risk warnings, an appropriateness assessment, a ban on incentives and a 24-hour cooling-off period.
A British Overseas Territory has already made its move: Gibraltar’s Prediction Market Regulations 2026 took effect on July 13, carving the sector out of the territory’s Gambling Act 2025 and requiring every event contract to be approved and certified by its Gambling Authority. Justice minister Nigel Feetham KC called it “the first dedicated framework of its kind anywhere in the world,” adding that its “focus is not on labels.” On the mainland, the FCA’s most recent perimeter report still holds that the ban remains appropriate, and details of any change have yet to surface.
