The Australian Government's Moneysmart website, run by the Australian Securities and Investments Commission (ASIC), has issued a public warning about prediction markets. According to a report by Casino.org, the notice was published on Monday, 3 August, and says that people trading on such platforms should expect to lose money.
The warning is aimed at global trading platforms that let users buy and sell shares tied to the outcome of future events. Those events include sports, commodities and other real-world questions.
What Moneysmart said
The notice says interest in prediction markets overseas, including for entertainment and sports events, has driven increased trading activity and public attention. It then cautions consumers directly.
"However, the reality is that you are more likely to lose money than make money," the Moneysmart website says.
The notice also cites an ASIC review, reported as finding that 75 per cent of retail traders lost money trading binary options. The source does not say when that review was conducted or how directly it applies to prediction markets.
ASIC identifies several risks. Most event contracts are "all or nothing", so one possible outcome is that the trader loses their entire investment. The notice contrasts this with a commodity position such as gold, which can rise and fall in value but is highly unlikely to become worthless. By comparison, a contract on tomorrow's high temperature in Sydney expires with no value if the specified temperature is not reached.
ASIC also says retail traders could be betting against someone who holds confidential or inside information.
No licence, no local protections
According to the notice, no prediction market is licensed to operate in Australia. As a result, traders have no protections under Australian financial services laws and no access to government-backed dispute remediation. In practical terms, a person who has a problem with a platform, such as a disputed outcome or an inability to retrieve funds, cannot rely on the usual Australian complaint and redress avenues described in the notice.
The source material does not say how prediction markets are treated under the Interactive Gambling Act 2001. It also does not say whether any enforcement action is planned. Those questions are not addressed in the report. Readers should be aware that online casino services are prohibited in Australia under that Act.
Industry claims and outside criticism
The report says prediction markets claim they allow traders to use their expertise and foresight to their financial advantage. Users can take positions on matters ranging from the winner of a baseball championship to a future US president. These are claims made on behalf of the platforms, and the source does not independently verify them.
Critics, according to the report, argue that the all-or-nothing outcome makes prediction market trading closer to betting than investing.
The report also notes a recent warning from Bank of America. The bank said the growth of prediction markets could lead to higher consumer debt and bad loans. It cited data suggesting that only a small number of "whales" profit consistently on the exchanges. The bank's note also raised concerns about the platforms' "easy access and gamified interfaces that encourage frequent and impulsive wagers."
What is not known
The source does not name any specific platforms, and it does not say how many Australians use prediction markets. It gives no figures on losses by Australian users. The notice is a consumer warning rather than an announced regulatory action, and the report does not indicate that any platform has been blocked or penalised.
Australians who are concerned about their gambling or trading activity can seek support through free, confidential services such as Gambling Help Online.