Prediction markets caught between banks and regulators

Photo: FOX ^.ᆽ.^= ∫ · Pexels

Prediction markets, the platforms where users bet on the outcome of elections, central bank decisions or any other uncertain event, have been growing in popularity for a while now. But that growth has also started drawing the attention of banks and regulators, who have stepped up scrutiny over how these platforms operate and where the money flowing through them comes from.

One concrete example is Polymarket, one of the sector's best-known platforms, which was reportedly debanked by JPMorgan last year over regulatory concerns. In other words, the bank decided to cut its commercial relationship with the company amid doubts its business model raised within the existing regulatory framework.

A sector still searching for a regulatory fit

The case is significant because it reveals the underlying tension surrounding these platforms: they combine elements of traditional betting, financial derivatives, and in many cases crypto technology, without fully fitting into any single clear regulatory category. That ambiguity is precisely what attracts part of their user base, but it's also what pushes banks and supervisors to tread carefully.

The episode also comes at a time when other crypto-linked initiatives are moving in the opposite direction within the traditional financial system, securing regulatory approvals that would have seemed unlikely just a few years ago. The coexistence between both worlds, regulated finance and these newer platforms, remains a work in progress.