Tiger Research said Asia lacks a regulatory architecture capable of classifying prediction markets, leaving the sector in a gray zone even as trading activity continues to grow on offshore platforms. According to the report, the absence of a licensing framework and the lack of an open-ended definition for financial products have not prevented participation. They have instead pushed liquidity abroad, where tax collection, consumer protection and market integrity oversight remain out of reach.
Classification sits at the center of the debate
The report says prediction markets have value as information platforms, but the law has never drawn a clean line between them and gambling. That turns the issue into a matter of definition before anything else.
It points to Section 9 of the U.K. Gambling Act 2005, which defines betting broadly enough to cover the outcome of a race, competition or other event or process, the likelihood of something happening or not happening, and whether something is true, so long as monetary value is attached. On that reading, prediction markets resemble betting in structural terms because they assign economic value to event outcomes or factual judgments.
Tiger Research says the policy question follows from that starting point: should prediction markets be brought under existing gambling regulation, reclassified within a financial framework such as derivatives law, or placed into a separate category through dedicated legislation?
Western jurisdictions took different institutional paths
The report says Western markets have been more accommodating than Asia, but not because of greater cultural tolerance for gambling. What matters, it argues, is whether an institutional path exists outside a direct clash with gambling law.
In the U.S., prediction markets were folded into derivatives regulation under the Commodity Exchange Act. In the U.K., they were absorbed through a general betting intermediary licensing regime. In continental Europe, financial rules and national gambling law combine to form a double barrier. The common pattern, the report says, is that institutional acceptance only becomes possible where an alternative framework exists alongside gambling law.
United States: expansion through derivatives law
Tiger Research says the U.S. did not make room for prediction markets by embracing gambling regulation. It did so by applying existing contract structures under the Commodity Exchange Act.
The report highlights two statutes. The Commodity Futures Modernization Act of 2000 laid the groundwork through an open-ended definition of “excluded commodities,” allowing non-financial variables such as election results and weather events to sit beside traditional commodities. The Dodd-Frank Act of 2010 then gave the Commodity Futures Trading Commission, or CFTC, two key powers: exclusive federal jurisdiction over event contracts and authority under Rule 40.11 to ban certain contracts tied to terrorism, assassination, war and gambling.
Neither law was written for prediction markets, the report says, but together they created a legal basis for treating these contracts as financial agreements rather than gambling products. They also concentrated oversight at the CFTC instead of forcing operators into a fragmented state-by-state process.
That legal structure, built over time, produced a market centered on licensed entities. Kalshi received designated contract market, or DCM, status in November 2020, allowing it to sell a broad range of event contracts to retail users. Polymarket, after facing enforcement action in 2022, moved toward compliance in 2025 by acquiring the licensed exchange QCEX.
United Kingdom: brought in through an existing gambling license
The U.K. chose a different route. The report says prediction markets there were not treated as an extension of derivatives law. They were handled as a form of betting under the Gambling Act 2005.
It identifies three provisions as especially important. Section 9 offers a broad enough definition of betting to create legal room for prediction markets. Section 13, on “betting intermediary,” captures the market structure closely because platforms match contracts between users instead of taking the other side directly. Section 65(4) allows the licensing categories to be adjusted by ministerial order, making it possible to absorb new market models without passing stand-alone legislation.
In February 2026, the Gambling Commission said prediction market platforms fall within the “betting intermediary” category and must hold the relevant license. The report says that was not a blanket ban. It created a defined route to market entry, with penalties for unlicensed operation and an open registration window for compliant firms.
Even so, major global platforms have been cautious about entering the U.K. Tiger Research ties that reluctance to litigation strategy in the U.S. Kalshi and Polymarket have both argued heavily in court that prediction contracts are financial derivatives, not gambling. Securing a U.K. betting intermediary license would formally place them in the category of gambling operators, weakening that line of argument in U.S. litigation.
The result, the report says, is a market environment that differs from the global norm and gives local operators an opening. Matchbook, an existing betting exchange, launched Matchbook Predictions in January 2026 using its betting intermediary license. New entrant Versus also launched its own prediction market after receiving a general gambling license from the U.K. Gambling Commission.
Europe: a double lock of financial and gambling rules
Continental Europe presents the most restrictive structure in the report. Under MiFID II and national gambling laws, prediction markets run into two separate barriers. Any contract classified as a financial instrument is immediately caught by the binary options ban. Any contract that avoids that label then faces strict national gambling definitions.
In July 2026, the European Securities and Markets Authority, or ESMA, said in an official statement that the binary payout structure of event contracts falls squarely within the binary options ban. The report says that effectively shut the door on entering the European market as a financial product.
Conditions under gambling law are not easier. France is the clearest example cited. Tiger Research says the country’s National Gaming Authority, or ANJ, escalated enforcement in stages and ultimately treated prediction market operations as illegal gambling.
Gibraltar stands out as the exception. In July 2026, it introduced dedicated Prediction Markets Regulations and defined prediction markets as a distinct third category. That creates a new route instead of forcing the sector into an existing one. The report adds a limitation: Gibraltar is not an EU member state, so its approach does not benefit from internal EU mutual recognition.
Tiger Research also says Europe’s closed structure may not be permanent. The European Commission has formally included the legal treatment of prediction markets in its review process for the Markets in Crypto-Assets framework, or MiCA. Whether that opens the way to a new regime will depend on a report due in June 2027.
Asia’s issue is institutional absence, not lack of demand
The report says Asian jurisdictions face two structural barriers that do not appear in the same form in Western markets.
- The first is state-controlled gambling licensing. Asia does not have a general licensing framework comparable to the U.K.’s betting intermediary category that can absorb private-sector innovation. Licensing power is usually distributed through state-backed monopoly structures.
- The second is financial product classification. In markets such as South Korea and Japan, financial law uses closed positive lists to define eligible underlying assets, making the U.S. approach of reclassifying contracts around non-financial contingent events legally difficult.
Tiger Research says Western cases show that the fate of prediction markets depends on the path used to define them, either as a financial product or a gambling product. In Asia, the more basic problem is that neither route currently offers an institutional foundation for this business model.
The report rejects the idea that prediction markets are blocked because of cultural aversion. Legal gambling markets already exist in Japan, South Korea, Singapore and Hong Kong. In its view, the question is not whether society can tolerate these markets but how regulators design a framework that can contain them.
South Korea: no entry route, criminal enforcement as the default
According to the report, policy discussion in South Korea has not yet reached the stage of debating the legal status or social value of prediction markets. The existing framework tends to cut the issue off early by treating the activity as speculative.
It points to the Act on Special Cases Concerning Regulation and Punishment of Speculative Acts, which covers “prize business” defined as a business that distributes money or property based on correctly predicting the outcome of a specific event. Tiger Research says that structure resembles how prediction markets operate.
Still, the report says the legal fit is not fully settled. The prize business rules presuppose a casino-like setup in which the operator directly controls the pool of funds. Modern platforms such as Polymarket use a matching structure instead, facilitating contracts between users rather than directly holding the money. There has been no judicial interpretation clarifying how that structural difference would be handled under current law.
The financial route is also closed. South Korea’s Capital Markets Act relies on a positive list approach to underlying assets. Financial indicators are covered, but election outcomes and other non-financial variables do not clearly fit within the derivatives category. Because the right to run gambling businesses is reserved for state monopoly entities anyway, private platforms cannot enter through that route either.
Japan: workarounds in a gray zone
Tiger Research says Japan’s prediction market activity has developed through regulatory workaround rather than formal integration. Local platforms often use a structure similar to the “three-shop system” associated with the pachinko industry, where direct cash flow is physically broken up during operation.
The report breaks that setup into three layers.
- Platform operator: the platform blocks direct cash deposits and runs a free reward model based on activities such as ad viewing. It also removes any internal cash redemption function, taking away the “gain or loss of property” element that sits inside the legal definition of gambling.
- Reward issuer: an independent third party, separate from the platform, issues rewards such as gift certificates to successful predictors. Separating the operator from the issuing entity reduces the legal risk that the operator is directly involved in turning rewards into cash.
- External redemption market: outside the platform, peer-to-peer transfer markets and affiliated merchants form an ecosystem where rewards are actually used or converted into cash. Because the platform operator does not take part in that distribution process, the structure remains formally separate.
The report says this is still an informal commercial practice in a regulatory gray zone, not a durable legal foundation. Global platforms are either blocked from Japan or operate through crypto exchanges under tight constraints. On the level of actual policy debate, Tiger Research says Japan has not moved materially beyond South Korea.
Regulatory absence has not stopped money from flowing in
The report says the absence of an institutional framework does not mean the market is absent. More than $52 million in liquidity, or about KRW 72.8 billion, flowed into prediction markets linked to South Korea’s June 2026 local elections. In Tiger Research’s view, that is enough to show that user participation on offshore venues has already crossed a meaningful threshold even without domestic rules.
Those trades sit outside the tax system, the report says, and there is no effective consumer protection or market integrity oversight.
Tiger Research outlines three policy responses available to regulators:
- expand existing criminal statutes and enforce sanctions, which it describes as South Korea’s current approach;
- block platform access through technical measures, which it calls the Singapore model;
- bring prediction markets into regulation and obtain both tax revenue and supervisory authority in the process.
The report says only the third option can directly achieve practical goals such as tax collection, consumer protection and market transparency.
It estimates that global annual prediction market volume in 2026 will exceed $200 billion. Assuming conservatively that South Korean users account for 1% of that amount, the volume attributable to a single Asian market would reach $2 billion. Depending on the tax model, that could generate an estimated $4 million to $43.2 million in new annual tax revenue.
The larger point, Tiger Research says, is not the size of those numbers. Without regulatory adaptation, the trading will not disappear. It will keep taking place in unregulated environments, while authorities give up tax receipts and oversight and still bear administrative and criminal enforcement costs.
Three paths for rebuilding the policy approach
In the final section, the report says institutional adaptation depends on which framework policymakers choose to define prediction markets.
Path one: gambling regulation
This route would adapt existing Asian models used for state-approved speculative activity such as sports betting pools or integrated resort casinos. The report says it aligns with state monopoly structures and can be justified through public-fund arguments, but it comes with built-in limits when applied to private platform business models.
Path two: derivatives regulation
Tiger Research describes this as the least frictional and most operationally feasible route. It would involve fine-tuning the definition of financial products, drawing on precedents such as Japan’s Financial Instruments and Exchange Act accepting non-financial variables or the “economic risk” language in South Korea’s Capital Markets Act. The report says that approach avoids a direct clash with state gambling monopolies and can reduce concerns about speculation and manipulation by limiting eligible underlying assets to publicly verifiable statistical variables.
Path three: a standalone third category
The third option is to design a dedicated legislative framework, as Gibraltar did. The report says this allows the most precise regulatory calibration, but it also carries the highest legislative and political cost because there are few precedents.
Tiger Research says Asia first needs a public forum
The report argues that this is a long-term institutional project rather than a near-term policy outcome. In many Asian jurisdictions, even the most basic public discussion about the legal identity of prediction markets has not yet formed, making legislative momentum hard to build.
Tiger Research says prediction markets remain unfamiliar across much of Asia and no actor is clearly leading the public narrative around them. Before any policy route can be pursued, the region needs a formal public forum that can analyze how these markets work and debate the core questions in the open. The report points to public-private roundtables as one example of the kind of process now needed.
It also says the debate will need organizations capable of carrying data and analysis into actual policy discussions. The report mentions Limitless Research as an example of a specialized research institution that can demonstrate data-driven forecasting models while helping build a public framework for assessing market value.
Tiger Research ends on a narrow point: prediction markets carry visible benefits and visible risks, but reaching an institutional conclusion before a real debate takes place would skip the core issue. What is missing now, the report says, is constructive public discourse.