GIBRALTAR BECOMES THE FIRST JURISDICTION TO CREATE A DEDICATED REGULATORY FRAMEWORK FOR PREDICTION MARKETS

Gibraltar has become the first jurisdiction to introduce a dedicated regulatory framework for prediction markets, creating a separate legal category outside traditional gambling legislation and offering a potential model for regulators still deciding how to oversee the emerging sector.

The publication of the Prediction Market Regulations 2026 marks an important milestone in the development of prediction markets. Rather than attempting to fit these platforms within existing gambling or financial services legislation, Gibraltar has created a bespoke regulatory regime designed specifically for event-based markets.

The move comes as regulators around the world continue to grapple with a fundamental question: should prediction markets be treated as financial products, gambling or something entirely different?

In the United States, platforms such as Kalshi and Polymarket increasingly fall under the oversight of the Commodity Futures Trading Commission (CFTC), although several states continue to challenge their legality under gambling laws. Across Europe, the picture remains fragmented. Many jurisdictions treat prediction markets as unauthorised gambling, while financial legislation offers little clarity for contracts based on non-financial events such as elections, sporting fixtures or current affairs.

Against that backdrop, Gibraltar has adopted a different approach.

A distinct regulatory category

Under the new regulations, prediction markets become a separate regulated activity rather than another form of betting.

Operators will require a dedicated prediction market licence, even if they already hold a Gibraltar gambling licence. The regulations also make clear that authorised prediction market activity will not be treated as betting, gaming or lotteries solely because contracts are linked to future events.

The distinction is significant. Prediction markets share characteristics with both financial exchanges and betting platforms, yet fit comfortably into neither category. Rather than adapting existing legislation, Gibraltar has created rules tailored specifically to how these markets operate.

Market integrity at the core

The framework places market integrity and consumer protection at its centre.

Operators must demonstrate that markets are clearly defined, capable of objective settlement and resistant to manipulation. Unlike the current US approach, operators cannot self-certify new markets. Each market must be approved by the regulator and remains subject to ongoing supervision.

The regulations also give the regulator broad powers to prohibit markets involving criminal activity, terrorism, armed conflict, deaths or serious injury, as well as any contract considered likely to encourage manipulation, consumer harm or reputational damage.

These provisions reflect concerns that have become more prominent as prediction markets expand beyond politics and financial indicators into a wider range of real-world events.

Digital assets recognised

One notable aspect of the framework is its treatment of digital assets.

The regulations permit licensed operators to use approved stablecoins for deposits, collateral, settlements and withdrawals, subject to Gibraltar’s wider digital asset framework.

The decision reflects the reality that many prediction market platforms have developed within crypto ecosystems, while acknowledging the increasing role of regulated digital assets in financial services.

Beyond licensing

The regulations follow Gibraltar’s first approvals in principle for prediction market operators, including ADI PredictStreet and, more recently, WagerWire.

A Gibraltar licence will not automatically grant operators access to other jurisdictions. They must still comply with local gambling or financial services laws wherever they intend to offer their products.

Even so, Gibraltar’s framework could have implications beyond the territory itself.

Prediction markets have spent much of the past decade operating in regulatory grey areas. Contracts linked to financial outcomes often resemble derivatives, while those based on elections, sport or current affairs are commonly treated as gambling. Neither approach has provided a consistent regulatory solution.

By creating a dedicated legal framework, Gibraltar is effectively recognising prediction markets as a distinct activity that warrants its own regulatory treatment rather than being forced into existing categories.

A model for other jurisdictions?

Whether other regulators follow Gibraltar’s lead remains to be seen.

The United States continues to refine its approach through the CFTC while Europe largely relies on existing gambling and financial legislation. As prediction markets attract greater institutional interest and move further into the mainstream, pressure is likely to increase for clearer legal classification.

Gibraltar’s framework is therefore significant beyond its own borders. It represents the first practical attempt to regulate prediction markets through a purpose-built regime, rather than adapting rules designed for other sectors. Whether that approach becomes a model for other jurisdictions will depend on how the market develops and whether the framework succeeds in balancing innovation, market integrity and consumer protection.