Should Prediction Markets Be Regulated Like Betting? A Legal Perspective

By Gerardo Ballesteros Félix Díaz

Legal and Corporate Consultant in Gaming and Sweepstakes

Platforms that allow users to invest money on the outcome of elections, economic decisions, sporting events, or events of public interest have gained popularity in various countries. However, their growth also raises a question that regulators will have to answer sooner or later: should they be considered a form of betting?

From a legal perspective, there are arguments that support their incorporation into the regulatory frameworks applicable to gambling and betting.

A Structure Highly Similar to a Bet

Although many platforms present prediction markets as financial instruments or mechanisms for collective intelligence, their operation shares several elements with traditional betting.

In both cases, there is an initial financial investment, a future and uncertain event, and the possibility of obtaining a profit or suffering a loss depending on the final outcome. From this viewpoint, the financial incentive does not stem from creating value on a productive asset, but rather from the success or failure of a prediction.

Therefore, it can be argued that the economic and functional nature of these platforms presents significant similarities to traditional betting models.

A New Challenge for Consumer Protection

The rapid expansion of these platforms also opens a debate regarding user protection.

While regulated gambling operators are typically subject to obligations related to responsible gaming, self-exclusion mechanisms, age controls, and anti-money laundering procedures, many prediction markets currently operate under different regulatory schemes or, in some cases, in legal gray areas.

This discrepancy raises questions about the level of protection consumers receive and the advisability of establishing homogenous rules for activities that, from the user’s perspective, may present similar dynamics.

Integrity Risks in High-Impact Events

Unlike a conventional sports bet, some prediction markets allow for speculation on political, economic, or social events of enormous relevance. Presidential elections, regulatory decisions, international conflicts, or judicial rulings can become the subject of markets involving thousands of users.

This scenario generates new regulatory concerns. Chief among them are:

• The potential use of insider information.
• Market manipulation.
• The creation of financial incentives surrounding events whose integrity is essential to society.

Although many of these risks also exist in other financial markets, their presence forces an analysis of whether current oversight mechanisms are sufficient.

Anti-Money Laundering and Traceability

Another relevant aspect is the use of digital assets and decentralized technologies by some platforms.

When these models operate without clear supervision, challenges can arise regarding user identification, transaction traceability, and compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) policies.

From a regulatory standpoint, incorporating these markets into a specific normative framework could facilitate the implementation of controls that do not always exist uniformly today.

Innovation and Regulation Should Not Be Opposing Concepts

Regulating a new technology does not necessarily mean limiting its development. On the contrary, a clear legal framework can offer greater certainty to both operators and users, promote competition under equitable conditions, and strengthen trust in these types of platforms.

The challenge for regulators lies in finding a balance between fostering innovation and ensuring consumer protection, market integrity, and transaction transparency.

A Debate That is Just Beginning

Prediction markets represent one of the most interesting regulatory topics of the coming decade.

Various jurisdictions continue to analyze the legal nature of these platforms and which authority should oversee them. In some cases, they are considered financial products; in others, derivative contracts; and there is also the stance that, due to their economic and operational characteristics, they should be subject to the rules applicable to gambling and betting.

From this latter perspective, recognizing the functional similarities between both models would allow for the construction of a regulatory framework that combines innovation, legal certainty, and effective protection for participants.

The debate is far from over, but its importance will continue to grow as these platforms expand their presence in international markets.

Editor’s Note

The opinions expressed in this article belong exclusively to its author and do not necessarily represent the editorial stance of iGaming México.