Financial products or illicit gambling? Can Hong Kong regulate prediction markets?
Interactive Brokers’ offering in city puts legality of prediction markets in question as regulator stresses case-by-case approach
The legality of prediction markets in Hong Kong has been called further into question, with at least one international brokerage firm operating such a platform in the city, prompting the market regulator to say certain activities may be considered “financial products”.
Lawyers were also split on whether the delineation between financial products and illegal gambling was clear under the city’s existing laws given the nature of prediction markets, with one saying the latest case highlights a “grey area”.
Prediction markets were thrust into the public spotlight in Hong Kong after the government abruptly suspended plans to launch basketball betting, citing the rapid rise of such platforms and their potential to promote gambling.
The Home and Youth Affairs Bureau has previously explicitly said that sports betting on prediction markets was illegal, while the Investor and Financial Education Council – a subsidiary of the Securities and Futures Commission (SFC) – said people who wagered on such platforms had no protections under the Securities and Futures Ordinance.
The SCMP found that Interactive Brokers Hong Kong was hosting its own prediction market platform that allowed users to place yes-no bets on Hong Kong-related topics such as the movement of the Hang Seng Index, the city’s quarterly GDP growth, and consumer price index.
The company is a subsidiary of the US-based Interactive Brokers LLC.