Asia Faces Regulatory Gap as Prediction Markets Shift Offshore, Tiger Research Warns

Asia’s growing interest in ‘prediction markets’ is rapidly outpacing its regulatory preparedness, pushing users and liquidity toward offshore platforms and leaving domestic authorities with a widening consumer-protection and tax-collection blind spot. That is the central warning in a new report from Tiger Research, which argues that the region’s failure to clearly classify prediction markets—as ‘financial products’, ‘gambling’, or a distinct third category—has effectively created a regulatory vacuum.

The debate is more than semantic. Prediction markets allow participants to buy and sell contracts tied to the outcome of real-world events—elections, policy decisions, economic releases, even weather—turning probabilities into tradable prices. Whether regulators treat that structure as betting or as a form of derivatives trading determines everything from licensing and disclosure requirements to permissible contract types, market access, taxation, and enforcement powers.

Tiger Research notes that Western jurisdictions have largely built workable—if imperfect—frameworks by routing prediction markets through existing rulebooks. The U.S. has selectively absorbed parts of the sector into derivatives oversight, while the U.K. has taken a licensing approach under gambling law. Continental Europe, by contrast, has largely restricted the model through a combination of securities and gambling barriers. Asia, the report argues, has not settled on any comparable pathway, making it difficult for legitimate platforms to operate onshore even as demand continues to rise.

Under the U.K.’s Gambling Act 2005, prediction activity related to sporting results, the occurrence of events, or the truth of factual statements can fall broadly within the scope of betting. Tiger Research points out that prediction markets structurally resemble betting in many cases, but the decisive issue is not labels—it is the design of supervisory architecture. In the U.S., regulators have not treated the sector as mere gambling; instead, they have used derivatives law to define what kinds of event contracts may be offered and under what conditions. The U.K., meanwhile, can regulate platforms through existing betting intermediary licenses, which map neatly onto marketplaces that match users rather than taking the opposite side of wagers.

The U.S. framework stems from a sequence of legal changes that expanded what could be treated as commodity-linked contracts. The 2000 Commodity Futures Modernization Act introduced the idea of ‘excluded commodities’, allowing certain non-financial variables to be incorporated into regulated contracts. The 2010 Dodd-Frank Act strengthened the Commodity Futures Trading Commission (CFTC)’s authority to supervise event contracts while also granting power to prohibit specific contract types. In practice, that has created a controlled environment where some markets—such as election, climate, or policy-linked contracts—may be permitted under defined constraints, rather than broadly legalized.

That regulatory pathway enabled Kalshi to obtain designation as a Designated Contract Market (DCM) in November 2020, allowing it to offer event contracts to retail participants under federal oversight. Polymarket, which previously faced enforcement headwinds, has also explored routes toward compliance and institutional legitimacy. Tiger Research characterizes the U.S. approach as ‘permissioned access’—a model where regulators shape market boundaries contract-by-contract, rather than opening the sector wholesale.

The U.K. has taken a different stance, generally avoiding the argument that prediction markets are financial instruments. Instead, it has emphasized managing them as a licensable betting-related activity. In February 2026, the U.K. Gambling Commission clarified that prediction markets are not inherently prohibited and can, in principle, be operated legally through licensing. According to Tiger Research, this has created a clearer onshore entry point than many Asian jurisdictions currently offer.

Yet the report highlights a strategic tension for global platforms: companies that position event contracts as ‘financial’ in U.S. legal and regulatory discussions may be reluctant to obtain a U.K.-style gambling license. Being formally recognized as a betting operator could weaken their narrative elsewhere, including in U.S. litigation or regulatory negotiations. Tiger Research says this gap has benefited local U.K. players such as Matchbook and Versus, which have moved more quickly to capture domestic market share.

Continental Europe remains the most restrictive major region. If event contracts are classified as financial products, they risk being swept into bans or tight constraints associated with binary options. If they attempt to sit outside securities regulation, national gambling laws can still block operations. In July 2026, the European Securities and Markets Authority (ESMA) said the payoff structure of event contracts is fundamentally similar to binary options, reinforcing the view that they belong under strict investor-protection rules. France’s gambling regulator, ANJ, has also moved to categorize the model as ‘illegal gambling’ following stepped-up enforcement. The main partial exception cited by Tiger Research is Gibraltar, which has pursued dedicated legislation to treat prediction markets as a ‘third category’, although its non-EU status limits broader applicability across the bloc.

Asia’s challenge, Tiger Research argues, is less about cultural opposition and more about missing institutional plumbing. South Korea, Japan, Singapore, and Hong Kong all have legal betting markets in some form, yet most lack a broadly usable license for private, digital prediction platforms or a flexible derivatives definition that can accommodate non-financial underlyings such as elections or social events. As a result, platforms struggle to find a legal “door” into regulated markets—even where policymakers might be open to oversight and taxation in principle.

South Korea is singled out as a market where criminal enforcement logic may take precedence. Under the country’s Act on the Regulation and Punishment of Speculative Acts, certain prize-based businesses that involve predicting event outcomes and distributing property can be interpreted broadly—an uncomfortable overlap with prediction market mechanics. At the same time, modern platforms typically function as intermediaries matching users, rather than as operators holding stakes directly, making one-to-one application of legacy concepts legally and technically debatable. The deeper issue, Tiger Research says, is that there has been little judicial precedent or sustained policy discussion to clarify that boundary.

Routing prediction markets through financial regulation is also difficult in South Korea due to a ‘positive list’ approach in capital markets law, which enumerates permissible underlying assets and leaves limited room for non-financial variables. Compounding that, betting rights are widely viewed as effectively state-controlled, structurally limiting legal entry for private platforms. The result is a policy environment where prediction markets are often framed first through a ‘speculation’ or ‘gambling’ lens, before regulators consider whether a supervised, taxable structure could be designed.

Japan, according to the report, has seen more indirect experimentation. Some domestic models have attempted to reduce the appearance of direct cash wagering by separating the platform, a reward issuer, and an external secondary market—an approach reminiscent of the pachinko industry’s “three-party” practices. Users may engage within the platform without direct cash-out functionality, while rewards circulate externally. Tiger Research stresses that such structures are better understood as temporary workarounds than as models backed by explicit regulatory approval.

The report’s core warning is that the absence of regulation does not eliminate the market—it simply pushes activity offshore. Tiger Research cites an estimate that during South Korea’s local elections in June 2026, one prediction market attracted roughly $52 million in liquidity—about 72.8 billion won—illustrating how quickly domestic demand can migrate to overseas venues even without local supervision. In that context, regulators face a dilemma: they may not be able to fully block access, but they are still responsible for consumer harm, disputes, and market manipulation risks that arise when trading occurs beyond their jurisdiction.

Tiger Research estimates global annual prediction market trading volume could exceed $200 billion in 2026. Even assuming Asian users represent just 1% of that activity, the implied regional volume would be roughly $2 billion. Depending on how a jurisdiction designs taxation—transaction-based fees, operator levies, or profit-based taxation—the report projects annual new tax revenue potential ranging from about 4 billion won to 43 billion won (approximately $2.9 million to $31 million). The policy question, it argues, is not whether the industry should exist—because it already does—but whether governments will manage it inside a framework that captures taxes and enforces standards.

The report outlines three broad routes for regulators. The first is to expand enforcement under criminal or gambling statutes. The second is to pursue technical blocking measures—an approach often associated with Singapore-style access restrictions. The third is to integrate prediction markets into a regulated regime to secure oversight and tax authority. Tiger Research argues only the third option can realistically advance all three practical objectives at once: ‘consumer protection’, ‘market transparency’, and ‘tax capture’.

Even within a legalization-and-supervision path, design choices diverge. A gambling framework may align with existing licensing infrastructure but could struggle to accommodate innovation in decentralized or high-frequency trading models. A derivatives framework can reduce the perception of pure wagering and enable institutional-grade controls, but may require revisions to statutory definitions of what counts as an underlying asset. Creating a ‘third category’ tailored to digital event contracts could be the most precise solution, Tiger Research says, but also the most expensive politically and legislatively.

Tiger Research concludes that prediction markets should not be reduced to a binary “allow or ban” debate. Capital, liquidity, and users are already moving across borders, and policymakers are increasingly deciding between unmanaged gray markets and supervised participation. The firm calls for a structured public-private forum to assess data integrity, consumer safeguards, and potential public-interest applications—arguing that leaving the sector in limbo is proving to be the least efficient outcome for both regulators and the market.