Tiger Research says Asia’s prediction market sector is trapped in a regulatory gray zone, with no broad licensing regime and no open-ended legal definition of financial products that could absorb the business. In the firm’s view, that gap has pushed tens of millions of dollars to offshore platforms, where governments collect no tax revenue and users operate without formal investor protections.
The report argues that this is not a question of culture. It is a question of institutional design. The central issue, according to Tiger Research, is how the law should classify prediction markets: as derivatives, as gambling, or as a separate third category.
Classification sits at the center of the debate
Tiger Research says prediction markets may have value as information platforms, but the law has never drawn a clean line between them and gambling. That leaves the debate anchored in a basic legal question: what counts as betting.
The report points to Section 9 of the UK Gambling Act 2005, which defines betting broadly once monetary value is attached. Under that provision, betting can involve:
- the outcome of a race, competition, or other event or process;
- the likelihood of something happening or not happening;
- whether something is true.
On that definition, prediction markets look structurally close to betting because they attach economic value to the outcome of an event or to the truth of a factual proposition. Tiger Research says the policy dispute follows from that starting point: regulators must decide whether to place these markets inside existing gambling law, reclassify them under a financial framework such as derivatives law, or create a standalone category through separate legislation.
Why Western jurisdictions found a path
The report says the relative openness seen in parts of the West does not come from greater tolerance toward gambling. It comes from the fact that some jurisdictions already had legal structures that could take in prediction markets without forcing a direct clash with gambling law.
In the United States, prediction markets were treated as derivatives under the Commodity Exchange Act. In the United Kingdom, they were accommodated under a general betting intermediary license regime. In the European Union, the position is tighter: if a contract is classified as a financial instrument, it runs into the binary options ban; if it avoids that classification, it then faces strict national gambling laws.
Tiger Research says the pattern is consistent. Institutional acceptance becomes possible only where a jurisdiction has an alternative framework outside core gambling law, such as derivatives legislation or a flexible licensing system.
United States: widening the scope of derivatives law
In the US, Tiger Research says prediction markets were not accepted by endorsing a gambling model. They were brought in through deliberate use of existing commodity and contract law.
The report highlights two key statutes:
- the Commodity Futures Modernization Act of 2000, which created a foundation through an open-ended definition of “excluded commodities,” allowing non-financial variables such as election outcomes and weather events to sit alongside traditional commodities like crude oil;
- the Dodd-Frank Act of 2010, which gave the Commodity Futures Trading Commission, or CFTC, two important powers: exclusive federal jurisdiction over event contracts, and the authority under Rule 40.11 to prohibit certain contracts tied to terrorism, assassination, war, and gambling.
Tiger Research says neither law was written specifically for prediction markets. Together, though, they created the legal basis to treat these contracts as financial agreements rather than gambling products, while putting the CFTC in the position of central regulator instead of leaving operators to navigate a state-by-state process.
That legal buildout, according to the report, eventually produced a market around licensed entities. Kalshi obtained designated contract market, or DCM, status in November 2020, allowing it to sell a wide range of event contracts to retail investors. Polymarket, after enforcement action in 2022, moved toward compliance by acquiring the licensed exchange QCEX in 2025.
United Kingdom: folding platforms into betting intermediary licensing
The UK took a different route. Tiger Research says British regulators did not treat prediction markets as an extension of derivatives. They treated them as a form of betting and used the Gambling Act 2005 to pull them into an existing regulatory structure.
The report highlights three provisions:
- Section 9, whose broad definition of betting gives regulators a flexible legal base;
- Section 13 on “betting intermediary,” a category that fits the structure of prediction markets because those platforms match contracts between users instead of taking the positions themselves;
- Section 65(4), which allows licensing categories to be adjusted by ministerial order, giving the framework room to absorb new market models without standalone legislation.
According to Tiger Research, the UK Gambling Commission said in February 2026 that prediction market platforms fall under the betting intermediary category and must hold the relevant license. The report says this was not a blanket ban. It created a defined entry path, with penalties for unlicensed operations on one side and an open registration window on the other.
Even so, major global platforms have remained cautious about entering the UK. Tiger Research ties that hesitation to US litigation strategy. Kalshi and Polymarket have both argued extensively in US legal proceedings that prediction contracts are financial derivatives, not gambling products. Taking a UK betting intermediary license would formally classify them as gambling operators and could weaken that position in the US.
The result, the report says, is a market environment that differs from the global pattern and leaves space for local operators. Matchbook, which already held a betting intermediary license, launched Matchbook Predictions in January 2026. New entrant Versus also obtained a UK Gambling Commission general betting license and launched its own prediction market.
Europe: two layers of closure
Continental Europe presents what Tiger Research describes as a dual barrier. Financial regulation under MiFID II is paired with national gambling law, leaving prediction markets boxed in from both directions.
If an event contract is classified as a financial instrument, it is immediately exposed to the binary options ban. If it avoids that classification, it then faces strict gambling definitions and national enforcement.
The report notes that the European Securities and Markets Authority, or ESMA, said in an official statement in July 2026 that the binary payout structure of event contracts falls squarely within the binary options prohibition. Tiger Research says that effectively shut the door on entering Europe as a financial product.
Conditions under gambling law are no easier. France is presented as the clearest example. The report says the National Gaming Authority, or ANJ, stepped up enforcement in phases and ultimately treated prediction market operations as illegal gambling.
There is one exception. In July 2026, Gibraltar adopted a dedicated Prediction Markets Regulations framework and defined prediction markets as a distinct third category. Tiger Research says that approach created a new path instead of trying to squeeze the business into older legal forms. But Gibraltar is not an EU member, so the model does not benefit from internal EU mutual recognition.
Still, the report says Europe’s position may not be fixed forever. The European Commission has already placed the legal treatment of prediction markets into the review process for Markets in Crypto-Assets, or MiCA. Whether that leads to a more permissive framework may depend on the conclusions of a report due in June 2027.
Asia: no opening through gambling law or financial law
Tiger Research says Asian jurisdictions face two structural constraints that do not appear in the same form in Western markets.
- First, gambling licenses are commonly state-controlled. There is no broad private-sector licensing category comparable to the UK’s betting intermediary model. Licensing authority sits inside monopoly-style public structures.
- Second, financial law in markets such as South Korea and Japan uses closed positive lists to define eligible underlying assets. That makes it difficult to replicate the US approach of reclassifying event contracts through broad concepts built around non-financial contingencies.
The report says prediction markets can gain a foothold only when the law gives them a definitional path through financial products regulation or gambling regulation. In much of Asia, neither system currently offers that institutional base.
Tiger Research also rejects the argument that prediction markets are blocked because Asian societies are uniquely uncomfortable with gambling. Japan, South Korea, Singapore, and Hong Kong already have lawful gambling markets. The real issue, the firm says, is how to build a regulatory structure that can absorb this specific business model.
South Korea: criminal enforcement becomes the default
In South Korea, Tiger Research says the public debate has not yet reached the point where the legal status or social value of prediction markets is being seriously assessed. Existing rules treat them as speculative products at the outset, cutting off discussion before it starts.
The report points to the Special Act on Regulation and Punishment of Speculative Acts, which covers “prize business.” That category includes operations that distribute money or property based on correctly predicting the outcome of a specific event, a structure Tiger Research says resembles prediction markets.
At the same time, the report says the legal picture is not fully settled. Prize business law assumes a casino-style setup where the operator directly controls the pool of funds. Modern platforms such as Polymarket use a matching model instead, facilitating contracts between users without directly holding the pool. Tiger Research says there is still no judicial interpretation explaining how that structural difference would be treated under current rules.
The financial route is also largely closed. South Korea’s Capital Markets Act defines underlying assets through a positive list. Financial indicators are included, but there is no clear legal basis for treating non-financial variables such as election outcomes as derivatives. Since gambling rights remain reserved to state monopoly entities, private platforms cannot rely on that route either.
Japan: workaround structures, not full integration
Japan’s prediction market scene, according to the report, has developed through regulatory workarounds rather than formal institutional integration.
Tiger Research says local platforms often use a model similar to the “three-shop system” associated with the pachinko industry, designed to break the direct cash flow inside the operating structure.
The report breaks the arrangement into three parts:
- the platform operator, which blocks direct cash deposits and instead runs a free reward model tied to activities such as viewing ads, while removing any internal cash redemption feature so that the element of “gain or loss of property” is weakened;
- the reward issuer, an independent third party that gives successful users rewards such as gift certificates, separating the platform from direct redemption risk;
- the external redemption market, where peer-to-peer transfers and affiliated merchants outside the platform create a separate ecosystem in which rewards are spent or converted into cash.
Tiger Research says this is still an informal commercial practice growing in a gray zone, not a structure resting on firm legal foundations. Global platforms are either blocked from entering Japan or operate only through cryptocurrency exchanges under strict limits. On the level of substantive policy discussion, the report sees little difference between Japan and South Korea.
Market activity continues even without a framework
Tiger Research argues that the absence of regulation does not mean the absence of a market. The report says more than $52 million, or about KRW 72.8 billion, in liquidity flowed into prediction markets tied to South Korea’s local elections in June 2026. In the firm’s view, that is evidence that user participation on offshore venues has already crossed a meaningful threshold even without a domestic framework.
Those trades sit outside the tax system. They also lack consumer protection and meaningful market integrity oversight. The report lists three broad responses available to regulators:
- expand existing criminal rules to impose sanctions, which Tiger Research describes as the current South Korean approach;
- use technical measures to block platform access entirely, identified in the report as the Singapore model;
- bring prediction markets inside regulation and capture both tax revenue and supervisory authority in the process.
Tiger Research says only the third option directly addresses practical regulatory goals such as tax collection, consumer protection, and market transparency.
The report projects that global annual prediction market volume will exceed $200 billion in 2026. Under a conservative assumption that South Korean users account for 1% of that amount, the attributable volume for a given Asian market would reach $2 billion. Depending on the tax model used, that could produce an estimated $4 million to $43.2 million in new annual tax revenue.
Tiger Research says the point is not just the size of those figures. Without regulatory adaptation, the trading will not disappear. It will continue in unregulated settings, leaving regulators to give up tax revenue and supervisory reach while still carrying administrative and criminal enforcement costs.
Three possible paths for Asia
The report closes by laying out three institutional routes for prediction markets.
The first is the gambling framework. Tiger Research says this path adapts existing Asian models already used for state-approved speculative activity, such as sports betting pools or integrated resort casinos. It fits naturally with monopoly structures and can be justified on public finance grounds, but it has built-in limits when applied to private platform business models.
The second is the derivatives route, which the report describes as the least frictional and the most operationally feasible. That would require adjusting legal definitions of financial products, drawing on precedents such as the acceptance of non-financial variables under Japan’s Financial Instruments and Exchange Act or the “economic risk” language in South Korea’s Capital Markets Act. Tiger Research says this route avoids a direct clash with state gambling monopolies while allowing regulators to limit eligible underlyings to publicly verifiable statistical variables, addressing concerns about speculation and manipulation.
The third is to create an independent category through dedicated legislation, similar to Gibraltar’s prediction market regulations. The report says that option offers the most precise regulatory calibration, but also carries the highest legislative and political cost because there is little precedent.
Public debate has to come first
Tiger Research says regulatory reconstruction will be a long-term institutional project, not a near-term result. In many Asian jurisdictions, even the basic public discussion needed to define the legal identity of prediction markets has not yet formed. Before any of the three policy routes can gain momentum, the report says, governments and market participants need a public deliberation process and broader social discussion about the value of prediction markets.
The firm adds that prediction markets remain an unfamiliar concept across much of Asia, and no single entity has taken the lead in shaping that conversation. Even basic agenda items have yet to reach formal debate.
For that reason, Tiger Research argues that a formal public forum is now necessary, including public-private roundtables built around the core legal and institutional questions. The report also mentions specialist research groups such as Limitless Research, saying organizations with strong analytical capacity could help by demonstrating data-driven forecasting models and showing their public value. In Tiger Research’s view, that process could become a decisive catalyst in moving prediction markets from fragmented discussion into the center of institutional policy debate.
The report ends on a narrow point: prediction markets carry clear benefits and risks, but reaching institutional conclusions before the debate itself takes place would miss the issue at the center of the discussion. What is missing now, Tiger Research says, is a constructive public conversation.