Prediction markets occupy a grey area under Hong Kong’s gambling laws, with experts warning that the increasingly popular betting platforms could pose risks related to market manipulation and consumer protection.

Lawyers and a legislator said that while a ban could restrict access to these largely unregulated betting platforms, authorities would face challenges in gathering evidence and prosecuting cases.

“If there were such a ban, we foresee there would be practical challenges for the authorities to crack down on individuals engaging in prediction market transactions online,” said PJ Kaur, counsel in intellectual property at law firm Hogan Lovells.

Prediction markets came into focus locally in April, when the government shelved plans to legalise basketball betting, citing their rapid rise as a significant risk that could indirectly fuel illegal gambling.

Primarily operating on overseas websites, prediction markets allow for crowdsourced trading on a wide range of future events, from tomorrow’s weather to political decisions such as election outcomes and geopolitical developments.

Two of the largest platforms are New York-based Polymarket and Kalshi. Polymarket recorded US$1.1 billion in trades on future outcomes over the past seven days, while Kalshi saw US$2.83 billion, according to DeFiLlama, an open-source database on decentralised finance.