The UK Gambling Commission (UKGC) has set out its view on prediction markets, stating that these products would fall under the definition of gambling in law in Great Britain and, therefore, would require the appropriate licensing in order to be legally operated.
In a blog post made public on 4 February, UKGCs director of strategy, Brad Enright, commented on prediction markets, which have become a popular and somewhat controversial alternative to sports betting very quickly in the US.
The UK’s Gambling Commission said that in the light of their discussions with the industry, the regulator was asked whether such products could be legally available in Great Britain and how they would be regulated. Enright clarified that any commercial offering which complies with the legal definition of gambling in UK law must be licensed and supervised by the gambling regulator. The only deviation recognized is spread betting which is regulated by the Financial Conduct Authority (FCA) rather than the UK Gambling Commission (UKGC).
The UKGC is of the opinion that present prediction market operators, depending on their configurations, would in all likelihood be classified as betting intermediaries under UK law, just like betting exchanges.
On the surface, prediction markets might appear quite different but the regulator mentioned that the fundamental elements of their working are very similar to those of betting exchanges, which have been legal in the UK since 2000. There is already a betting intermediary license designed to regulate such activities.
Enright made a point that if prediction markets are regulated under the UK’s framework, the licensed operators would have to comply with the regulator’s rules on consumer protection, integrity, and crime prevention. Besides that, he mentioned that compliance is constantly checked, and the UKGC will use enforcement measures if they find any violations.
More to that, the FCA must give the go-ahead to operators providing financial services that are not classed as gambling. On the issue of launching prediction markets in Great Britain, Enright stated that the UKGC is at odds with an operator who would claim that their product is non-gambling if it were marketed locally.
Operators of Prediction Markets Could Be Held Liable
Enright also cautioned that an unlicensed operation might lead to criminal charges and such an implication might also impact the existing licenses. He did not actually suggest that the license of a prediction market would be revoked if the market was running without good approval, however, he pointed out that the repertoire of punishments is similar to what some US states have done.
For instance, in Ohio, regulators have notified that the gaming licenses of the operators will be at risk of suspension or revocation if they take part in prediction markets, even if the conduct is carried out somewhere else. Enright stated that the UKGC won’t get involved in the legal controversies going on in the US or other jurisdictions, however, he stressed the differences in the structure of the UK and US gambling markets.
Sports betting is a traditional form of entertainment in Great Britain and is regulated by a national regulatory framework. The formal legalization was done through the Betting and Gaming Act 1960, which came into force on 1 May 1961.
In contrast, legal sports betting in the US is only recently established and mostly since 2018 and is still regulated on a state-by-state basis. There are no federal regulations that cover the market nationwide, although proposals are being made to introduce them.
Enright also wondered if the commercial motivation that has been behind prediction markets in the US would still apply to Great Britain, especially considering the mature and saturated UK betting market. He mentioned the globalization of gambling as a major sign that the regulator’s focus is not only on domestic but also international issues.
Summing up, he mentioned that the UKGC will continue tracking the main changes overseas so as to be in a good position to continue regulating effectively and upholding standards throughout the British market.
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