How prediction markets operate, the licences they may require and what operators should consider before launching.
A prediction market platform allows users to place bets or take financial positions on the outcomes of future events. Depending on its structure, the platform may require a gambling licence, a betting intermediary licence or financial regulatory authorisation.
The correct licensing route depends on how the platform operates, which events it offers and where its customers are located.
Will a political candidate win an election? Will Bitcoin reach a certain price? Will a company release a new product before a specified date?
Prediction markets turn these questions into markets where participants can take positions on possible outcomes. However, two platforms offering similar markets may operate under very different regulatory frameworks.
The licence depends on the activity, not the name of the platform.
What is a prediction market platform?
A prediction market platform is an online service where users predict or take positions on the outcomes of future events. These events can involve politics, sports, financial markets, cryptocurrency prices, technology or entertainment.
Each market defines a question, the possible outcomes and the source used to verify the result. Once the event is resolved, the platform settles the market according to its published rules.
Three elements should be distinguished:
- Prediction market platform: The website or application where users access markets and place positions.
- Prediction market software: The technology that creates markets, records transactions, manages positions and processes settlement.
- Prediction market operator: The business responsible for running the platform and meeting applicable legal requirements.
This distinction matters because operators and software suppliers may have different regulatory obligations. The agreements between them should also define their respective responsibilities. Our Technology Law services cover software licensing and related commercial arrangements.
How do prediction markets work?
Prediction markets allow participants to take positions on the outcomes of future events. For example, a platform might offer a market asking: “Will Bitcoin close above $100,000 on 31 December?” The platform defines the closing time, price source and settlement rules before accepting positions. Users then commit money, cryptocurrency or another permitted form of value to their chosen outcome. Once the event is resolved, the platform verifies the result using the agreed source and settles the positions accordingly.
The pricing mechanism depends on the operating model. Some platforms offer fixed odds, while others allow prices to change as users buy and sell positions. For instance, a contract priced at $0.65 that pays $1 if the event occurs may suggest a market-implied probability of approximately 65%. However, this reflects market expectations rather than a guaranteed outcome. These differences in pricing and transaction structure can also influence how regulators classify the platform.
Main types of prediction market platforms
Prediction market platforms generally operate through three models. Each creates a different relationship between the operator and its users.
| Operating mode | How it works | Potential regulatory treatment |
|---|---|---|
| Fixed-odds prediction market | Operator sets odds and accepts bets | Online betting or sportsbook regulation |
| Peer-to-peer prediction market | Users take opposing positions through a platform | Betting exchange or intermediary regulation |
| Tradable event contracts | Users buy and sell contracts linked to future outcomes | Financial, commodities or derivatives regulation |
Fixed-odds prediction markets
In a fixed-odds model, the operator determines the odds and accepts bets directly from customers. The operator assumes the financial risk and pays winning bets.
This structure resembles a traditional sportsbook, even when the market concerns politics, economics or technology rather than sporting events.
A sportsbook licence may be relevant, but operators must confirm that the licence permits the proposed event categories.
Peer-to-peer prediction markets
In a peer-to-peer model, users take opposing positions against each other. The platform facilitates the transactions and may earn revenue through commissions or trading fees.
The operator generally acts as an intermediary rather than accepting bets as the counterparty.
Regulators may classify this model as a betting exchange or betting intermediary, depending on local law.
Tradable event contracts
Some prediction market platforms allow participants to buy and sell contracts linked to future events.
A user may purchase a contract and sell it before the event occurs. The contract price can change based on market activity and expectations.
Depending on the contract’s legal characteristics and the applicable jurisdiction, this activity may fall under financial or derivatives regulation rather than conventional gambling legislation.
Free-to-play prediction platforms may receive a different assessment where participants do not risk money or anything of value. Paid credits, transferable tokens, entry fees and prizes with monetary value can affect that classification.
Are prediction markets considered gambling?
Prediction markets can be regulated as gambling, betting or financial services. There is no universal classification that applies to every platform.
The main factors include whether participants risk money or another item of value, how transactions are structured, who accepts the financial risk and whether users trade financial contracts.
A platform that accepts fixed-odds bets may fall within gambling regulation. A platform that facilitates transactions between customers may require betting intermediary authorisation. A platform offering derivatives may fall within financial regulation.
The legal classification should be established before selecting a jurisdiction or applying for a licence.
What licence does a prediction market operator need?
A prediction market operator may need an online betting licence, betting intermediary licence or financial services authorisation, depending on its operating model, event categories and target countries. There is no single international licence that covers every prediction market platform.
Operators must confirm that the proposed licence permits their specific activities. A general gaming licence does not automatically authorise peer-to-peer betting exchanges, political event markets or tradable financial contracts.
Which gaming licences may cover prediction markets?
Anjouan is one jurisdiction that operators may consider for betting-based prediction markets. The Anjouan Gaming Authority explicitly lists prediction markets among the activities that may be authorised under its internet gaming licensing framework. This makes the Anjouan Gaming Licence a potential option, provided the proposed operating model and event categories are approved within the specific licence conditions.
Curaçao may also be relevant for prediction market platforms that qualify as online gambling businesses. The Curaçao Gaming Authority regulates online games of chance under the National Ordinance on Games of Chance (LOK), and its public licence register includes an operator offering sports prediction markets. However, operators considering a Curaçao Gaming Licence must confirm that their proposed activities fall within the applicable gaming framework and are accepted by the regulator.
Neither licence automatically covers every prediction market model, financial derivative or target jurisdiction. The proposed transaction structure, event categories and customer markets must be reviewed before an application is submitted.
Our iGaming Licensing services assist operators with assessing licensing options and preparing applications across multiple jurisdictions.
What should be reviewed before choosing a jurisdiction?
The appropriate jurisdiction depends on the platform’s structure, the activities it offers and the countries where it intends to accept customers.
Operators should assess the following factors:
- Operating model: Determine whether the business accepts bets, matches customers or facilitates trading in event contracts.
- Event categories: Identify whether the platform will offer sports, political, economic, cryptocurrency or other markets. Some regulators restrict particular categories even when other betting activities are permitted.
- Target countries: Review the legal requirements of each country where customers will be accepted. Holding a licence in one jurisdiction does not automatically authorise operations elsewhere.
- Company structure: Establish which entity will hold the licence, contract with users, receive customer funds and manage the platform.
- Software and payments: Confirm whether the regulator accepts the selected software provider, settlement method and payment arrangements.
A licence should match the planned activities from the start. Our article on how choosing the wrong iGaming licence can limit your business explains how licensing decisions can affect banking, payments and corporate operations.
Legal and operational issues that can be overlooked
Getting a licence is only one part of launching a prediction market platform. Operators also need clear rules for settling markets, measures to prevent manipulation, customer protection procedures and reliable payment arrangements. Addressing these requirements early can help prevent disputes, compliance issues and operational problems after launch.
Market rules and settlement
Every market should clearly identify its possible outcomes, closing time, settlement source and payout conditions. The rules should explain how the platform will handle delayed events, cancellations, corrected results and disputed outcomes. These procedures should be established before customers commit funds. Unclear settlement rules can create disputes and expose the operator to regulatory and financial risk.
Manipulation and inside information
Some prediction markets concern events that a small number of people can influence. Political campaign staff, athletes, company employees or other insiders may possess information unavailable to ordinary participants.
Operators should assess the risk of manipulation and establish appropriate monitoring controls, restrictions on participation and procedures for investigating suspicious activity.
AML, KYC and customer protection
Real-money prediction market operators may be subject to anti-money laundering (AML), know-your-customer (KYC) and customer protection requirements. These can include identity verification, age checks, sanctions screening and transaction monitoring.
Platforms regulated as gambling businesses may also need to implement player protection and responsible gambling measures, including deposit limits and self-exclusion procedures. The applicable requirements depend on the operating model, customer locations and regulatory framework.
Banking and payment processing
A prediction market licence does not guarantee access to banking or payment processing.
Banks and payment service providers may review the operator’s ownership, licensing jurisdiction, event categories, customer countries and handling of customer funds.
Cryptocurrency transactions can require additional checks involving wallet screening, source of funds and transaction monitoring.
Operators should assess their banking arrangements before submitting a licence application. Our Banking and Payment Solutions services support businesses with corporate account opening, payment providers and financial arrangements across multiple jurisdictions.
Corporate structure and financial reporting
The company structure should reflect how the prediction market actually operates.
The licence holder, customer-facing operator, software supplier and payment entities may be separate businesses. Their responsibilities and financial relationships should be clearly documented.
Our Corporate and Commercial Law services assist with company formation, corporate structures and contractual arrangements.
Operators should also plan for bookkeeping, transaction reconciliation, financial reporting and applicable tax obligations. These functions can be supported through our Accounting Services.
How to prepare a prediction market platform for launch
A prediction market operation should undergo legal and regulatory review before the business commits to a company structure, software provider or licensing jurisdiction.
Before launch, the operator should:
- Confirm the legal classification of the proposed prediction market model.
- Identify the event categories and countries the platform intends to serve.
- Select a jurisdiction and licence that permit the planned activities.
- Establish the appropriate company and ownership structure..
- Verify software, supplier and settlement arrangements.
- Prepare market rules, AML/KYC policies and customer protection measures.
- Arrange banking, payment processing and procedures for handling customer funds.
- Confirm that all required authorisations are in place before accepting customers.
Businesses planning a wider gaming operation can also read our guide on how to start an iGaming business, which covers licensing, company setup, banking and compliance preparation.
How Michael Chambers & Co. LLC can assist
Michael Chambers & Co. LLC advises businesses on the legal, corporate and regulatory requirements involved in establishing prediction market platforms. Our team can review the proposed operating model, assess potential licensing jurisdictions and assist with the company structure required for the application.
We also provide support with licensing applications, AML and KYC procedures, software agreements, banking and payment arrangements, and ongoing corporate matters.
The relevant regulator determines whether a proposed prediction market falls within the scope of its licensing framework. Regulatory approval cannot be guaranteed.
Planning to launch a prediction market platform?
The appropriate licensing route depends on how the platform operates, which events it offers and where it intends to accept customers.
Operators should confirm the legal classification and regulatory requirements before incorporating the licensing company or launching real-money markets.
Contact our team to discuss the legal, licensing and corporate requirements for your proposed prediction market business.
Frequently Asked Questions
A prediction market platform is an online service where users place bets or trade positions based on the outcomes of future events. Markets may concern sports, elections, cryptocurrency prices, economic indicators and other events.
Real-money prediction market platforms generally require regulatory authorisation. Depending on the operating model and jurisdiction, this may involve a gambling licence, betting intermediary licence or financial regulatory approval.
A conventional sportsbook generally sets odds and accepts bets directly from customers. A prediction market may use the same structure, match users taking opposing positions or offer tradable event contracts. These differences can affect licensing requirements.
A sportsbook licence may cover certain fixed-odds prediction markets if the regulator permits the proposed event categories. It should not be assumed to cover betting exchanges or financial event-contract models.
An offshore gaming licence may be relevant to certain betting-based prediction market models, but coverage depends on the licence conditions, event categories and regulatory rules. It does not automatically authorise trading in financial derivatives or services in countries that require local approval.
No. Each country may impose its own gambling, betting or financial regulations. Operators must assess their target markets and restrict access where the proposed activity is not authorised.
Disclaimer: This article is provided for general information purposes only and does not constitute legal advice. The applicable legal and regulatory requirements depend on the platform’s operating model, event categories and relevant jurisdictions.
