Hong Kong’s Prediction Markets: Legal Grey Zone Sparks Debate Over Regulation, Manipulation Risks

Hong Kong’s Prediction Markets Are in Legal Limbo—And a Ban Won’t Solve the Problem

Hong Kong’s gambling laws don’t cover prediction markets like Polymarket and Kalshi, leaving operators in a regulatory grey zone—and experts say a ban alone won’t stop the risks of manipulation or protect consumers. Legal sources told News Directory 3 that enforcement would be nearly impossible without clearer evidence-gathering tools.

“If there were such a ban, we foresee there would be practical challenges for the [Hong Kong] government in gathering evidence and prosecuting cases,” legislator PJ Kaur said in a statement to South China Morning Post on June 27, 2026.

The Gambling Ordinance doesn’t explicitly define prediction markets as gambling, meaning platforms like Polymarket (U.S.-based) and Kalshi (acquired by Polymarket in 2024) operate with little oversight. Their decentralized finance (DeFi) models further complicate jurisdiction.

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Why the Legal Grey Area Puts Investors at Risk

Prediction markets—where users bet on elections, sports, or financial outcomes—have exploded in popularity, including in Hong Kong. But without clear rules, consumers face exploitation, especially in high-stakes markets tied to geopolitical events.

“The lack of transparency in these markets can lead to exploitation, especially for retail investors who may not fully understand the risks,” warned John Reading, a partner at Hogan Lovells.

Unlike traditional gambling, these platforms argue they’re “information markets,” not betting operations. But legal experts say the distinction is thin—and enforcement would be a nightmare.

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Enforcement Would Be a Legal Nightmare

A ban would force Hong Kong to prove prediction markets fall under the Gambling Ordinance—a law written decades ago, before DeFi even existed.

“The ordinance doesn’t account for modern financial instruments,” Reading said. “Prosecutors would need to demonstrate these platforms meet the definition of gambling—which is not straightforward.”

Legislators also question whether authorities could even track cross-border transactions. “Even if a ban were passed, the government would need to work with international partners to monitor offshore activity,” Kaur said.

For now, users access these markets through offshore platforms—with little immediate risk of disruption.

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How Other Countries Are Cracking Down—And Why Hong Kong Lags Behind

Hong Kong’s hands-off approach contrasts sharply with stricter regimes elsewhere. The U.S. Commodity Futures Trading Commission (CFTC) regulates some prediction markets under anti-manipulation laws, while the UK’s Gambling Commission classifies certain platforms as betting operations. Singapore has tightened DeFi rules, though prediction markets remain in a grey area.

“Hong Kong’s stance is more permissive than many Western jurisdictions,” said a source familiar with the city’s financial regulations. “But as these markets grow, the risks—particularly for retail investors—will likely force a reassessment.”

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No Timeline for Change—But Pressure Is Building

Legislative discussions on amending the Gambling Ordinance are underway, but no timeline exists. Legal experts suggest targeted regulations—like licensing or disclosure rules—could address risks without stifling innovation.

“A blanket ban might not be the answer,” Reading said.

For now, Hong Kong’s prediction markets remain untouched. But as global regulators tighten scrutiny on DeFi and gambling, the city’s approach may soon face pressure to align with stricter international standards.