The UK's Financial Conduct Authority (FCA) has reportedly contacted prediction market companies as it discusses whether to loosen a ban on the products for retail investors that has been in place since 2019.

According to a Friday report from The Times, the FCA is considering lifting the ban on prediction market platforms such as Polymarket and Kalshi for UK-based retail investors. Prediction markets offer binary options on event contracts covering outcomes in areas like sports, politics, and the weather, which places them under the scope of an April 2019 FCA ban under which companies were "prohibited from selling, marketing or distributing binary options to retail consumers." That ban followed persistent FCA concerns about consumer harm from binary options, which the regulator had previously restricted through measures introduced in earlier years.

At the time the ban was imposed, the FCA's executive director of strategy and competition, Christopher Woolard, said: "Binary options are gambling products dressed up as financial instruments."

The Times reported that many retail investors based in the UK have been using virtual private networks (VPNs) to bypass the country's restrictions on prediction markets and trade on Kalshi and Polymarket, both of which have operations in the US. In April, Bernstein Research speculated that the total prediction market industry could grow to roughly $240 billion in trading volume in 2026 and $1 trillion by 2030. Any FCA rethink would come amid a broader surge in interest in event contracts in the US, where the sector expanded rapidly around the 2024 US election.

If the FCA overturns the 2019 ban, platforms such as Kalshi and Polymarket could face challenges similar to those they are dealing with in the United States, where individual state gaming authorities have filed lawsuits against the companies over sporting event contracts. Last week, New Jersey officials petitioned the Supreme Court to hear its case against Kalshi, a move that could potentially lead to clarification between state and federal authorities over how prediction markets are regulated. For UK regulators, a key open question would be how any liberalized regime treats event contracts that resemble sports betting, an area the FCA does not currently oversee. What to watch next is whether the FCA opens a formal consultation, which would typically precede any rule change and give platforms and consumer groups a chance to respond.