By John Q. Hosedrinker 
New Zealand has declared prediction market operators Kalshi and Polymarket illegal under its gambling laws due to their status as unauthorized operators. This decision aligns with Australia’s recent ruling that such platforms constitute gambling, leading to similar regulatory scrutiny. While New Zealand currently monopolizes online wagering through a single platform, this move signals a stricter stance on unauthorized gambling activities.
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New Zealand’s recent declaration that prediction markets are a form of gambling has certainly sparked a lively discussion, and it’s not hard to see why. The core of the issue, at least from my perspective, is remarkably straightforward: if you can make or lose money by betting on the outcome of an event, it’s gambling, pure and simple. Whether that event is the next goal scored in a football match, the winner of a horse race, or, as in these prediction markets, the result of a political election or a major news story, the fundamental mechanism of wagering money on an uncertain future outcome remains the same.
It seems that New Zealand, with its already stringent regulations around gambling, is simply applying existing principles to this relatively newer domain. The country has a clear framework for authorised operators, with a significant portion of its gambling industry managed by state-owned or non-profit entities, all of which are mandated to contribute a portion of their profits back to the community. This structured approach means that platforms facilitating bets on future events, regardless of their perceived sophistication, are likely to fall under this established legal umbrella.
The idea that prediction markets are fundamentally different from traditional forms of gambling feels like a bit of semantic gymnastics. After all, the very nature of gambling is to predict an outcome. The scale or complexity of the event being predicted – be it a geopolitical shift or a simple coin toss – doesn’t alter the underlying act of placing a bet. The distinction often drawn between these markets and, say, the stock market, is interesting. While the stock market involves predicting company performance and market trends, and carries inherent risk, the argument is made that owning a stock grants actual ownership with intrinsic value. If an investment “fails,” one can still hold onto the stock, hoping for future recovery, unlike a lost bet which is simply gone.
However, even this distinction isn’t entirely clear-cut. Options trading, for instance, bears a striking resemblance to prediction markets. You’re essentially betting on the future price of a stock, and if your prediction is incorrect, the option can expire worthless, meaning the money invested is lost. This parallels the win-or-lose dynamic of many gambling activities. Furthermore, the very language used in financial markets, like the repeated warning that “your investments may go down as well as up,” strongly suggests an element of risk akin to gambling.
The ability to influence outcomes on prediction markets is another crucial factor highlighted. Unlike a fair die, where external manipulation is actively policed and considered illegal, prediction market outcomes can potentially be swayed by participants deliberately acting to shape the result. Imagine placing a large bet on a specific event occurring and then actively contributing to making that event happen. This level of potential interference blurs the lines even further and moves these platforms closer to activities explicitly defined as gambling. Insider knowledge, too, could be leveraged to gain an unfair advantage, much like in traditional betting scenarios.
The comparison to the stock market, while understandable in its speculative nature, often overlooks the core differences when viewed through a regulatory lens. Stocks represent ownership in a company, and while their value fluctuates, there’s an underlying asset. Prediction markets, on the other hand, are often structured around an agreement to pay out based on an external event, without any tangible asset or ownership stake being exchanged. The concept of “investing” in a prediction market feels more like placing a wager on a specific future state of affairs, with the potential for significant financial gain or loss.
The argument that buying actual stocks or index funds isn’t gambling because there’s no fixed time limit or hard end date offers another layer to the debate. While this provides a different kind of risk profile, it doesn’t necessarily negate the speculative element. Many people treat the stock market, particularly through day trading or highly speculative options, as a form of gambling. The core difference, it seems, lies in recourse. If a prediction market bet fails, the money is typically lost with no possibility of recovery or future sale of that “position.” With stocks, there’s always the potential to sell later, or hold for appreciation.
Ultimately, New Zealand’s stance seems to be about clarity and consumer protection. By classifying prediction markets as gambling, they are bringing them under a regulatory framework designed to safeguard individuals from potential exploitation and to ensure that profits are managed responsibly and, in some cases, contribute to the public good. While it might feel like a late declaration to some, the logic behind it is quite sound. If the essence of an activity involves wagering money on uncertain future outcomes, and the potential for manipulation or unfair advantage exists, then treating it as gambling, with all the associated regulations, is a sensible and consistent approach. It’s a move that could well influence how other nations perceive and regulate these burgeoning markets in the future.