Asia Prediction Markets Face Regulatory Vacuum, Driving Offshore Capital Flows

Tiger Research warns that Asia prediction markets are constrained by a regulatory vacuum: without clear licensing and workable legal classifications, tens of millions of dollars in liquidity are moving offshore. The report argues this is structural, not cultural. Key point: “one legal definition” can effectively block the industry. In Western jurisdictions, prediction markets gain access because they are routed through either derivatives-style frameworks or gambling intermediary licensing—allowing events contracts to be treated within existing regulatory categories. Examples cited include the US CEA/derivatives classification pathway (supporting event contracts under the CFTC), and the UK’s Gambling Act 2005 “gambling intermediary” model—creating defined entry routes and licensing for platforms. In Europe, regulators apply a “double lock”: MiFID II financial-tool classification can trigger a binary-options ban, while gambling laws then impose further barriers. A noted exception is Gibraltar, which created a separate “third category” framework for prediction markets. For Korea and Japan, the report highlights closed-off “positive list” financial definitions and state-controlled gambling rights, forcing workarounds or grey-zone practices. Korea’s approach relies heavily on criminal enforcement and uncertainty around how modern matchmaking platform mechanics fit existing “prize business” rules. Japan similarly uses structurally separated models to reduce legal risk rather than integrating prediction markets into a stable regime. Despite weak domestic frameworks, offshore participation is already meaningful: the report cites over $52m liquidity tied to Korea’s 2026 local election predictions (outside tax and consumer protection). Tiger Research concludes that regulation via a third category is possible (like Gibraltar), but the most feasible route may be adapting derivatives frameworks, with the main goal of enabling taxation, consumer protection, and market transparency for Asia prediction markets.