Britain’s Financial Conduct Authority (FCA) is testing whether its seven-year retail block on financial event contracts still works, even as its published line continues to defend the ban. Trading venues have been pulled into private conversations with the FCA about a possible easing. No consultation, draft rule, or start date has followed.
That gap is the whole story. Retail traders are already routing around the restriction, often through virtual private networks, while the watchdog still calls the same contracts too speculative for ordinary accounts. Volume elsewhere is surging, and platforms valued in the tens of billions are listing products that look a lot like the instruments frozen out in 2019.
Why the financial prediction market ban is under review
The FCA still treats contracts tied to financial prices and certain climate events as binary options. Sale, marketing, and distribution to retail clients have been prohibited since 2 April 2019 under Policy Statement PS19/11. Christopher Woolard, then Executive Director of Strategy and Competition, called binary options “gambling products dressed up as financial instruments” when the permanent ban landed.
Those rules remain live in FCA’s COBS 22.4. The consumer warning is just as blunt. The FCA’s binary options guidance states that any offer of this type of product is likely a scam because authorized firms cannot sell it.
Industry groups have walked officials through evidence that millions of residents already use overseas venues, including Kalshi and Polymarket. A City source told iGaming Today that prohibitions of this type are “largely ineffective,” and that driving demand offshore leaves traders with “no regulatory standards at all.” This is one of the standard lines of those who favor legal prediction market trading. As it was for those who favored legal sports betting before that. Namely, it’s taking place regardless; we would be better served by legalizing and properly regulating it rather than pushing it underground or offshore. It’s a truth, wrapped in a good bit of self-service.
The latest FCA perimeter report keeps one foot on each side of the line. It said the ban remained appropriate because of speculative design and consumer-harm risk, while leaving room for more work on access and on where the regulatory boundary sits. In short, their prohibition stance is weakening, but don’t expect any radical changes in the near term. Nothing happens in the British bureaucracy in the near term. But movement is afoot.
Retail event contracts and the binary options label
The live question is whether a yes-or-no contract on a rate decision, an inflation print, or an index close is simply a renamed binary option. Discussion paper DP25/3 asked whether speculative products should be judged by risk rather than by the label on the box. That question is at the center of the current talks.
The FCA did not immediately offer extra comment after The Times story landed. But the general sentiment remains that this is merely an introductory conversation, not the precursor to a policy change.
Across the Channel, product-structure tests are tightening in the same direction. A 3 July market briefing reviewed a European Securities and Markets Authority (ESMA) reminder that event contracts can still count as banned binary options when the payout is fixed, and the instrument falls within MiFID II.
If the British FCA keeps the 2019 product definition, retail access to financial prediction markets stays shut. If it moves to a risk-based test, venues could design contracts, disclosures, and loss limits that look nothing like the boiler-room binaries the ban was built to kill. This offers a glimmer of real hope to traders in the UK seeking to bring these investment options onshore.
Split supervision of financial contracts and licensed event wagering
Even a retreat on binary options would not open every contract type. Sports and political markets are regulated in the UK by the Gambling Commission. Director of Strategy Brad Enright spelled that out on 4 February 2026 in “Prediction markets — here’s what you need to know.”
Enright wrote that current commercial models would likely fall under the statutory definition of a betting intermediary, closer to a betting exchange than to a securities venue. He warned unlicensed operators (Kalshi, Polymarket) not to target or transact with consumers, citing criminal offenses for running without the right license. Spread betting remains the named exception, sitting with the FCA rather than the Gambling Commission.
An event-contract platform that wants a full menu would therefore need two permissions: an end to the retail binary-options prohibition and a gambling license covering political and sporting outcomes. Domestic exchange brands are already building UK-facing products inside existing gambling permissions. Those offerings do not unlock financial event contracts. They only show how the non-financial half can open without an FCA Handbook rewrite.
What easing prediction market restrictions would change
An easing would not arrive as a suddenly wide-open marketplace. It would look like a consultation, then Handbook text, then permissions. In short, a process. Firms would still need to answer the FCA’s finding that purely speculative products tend to cause net harm and “do not typically support growth in the real economy.” An easing would be the start of the journey toward onshore open markets, and merely the start, with no guarantees.
Traders using VPNs today are operating in a rogue manner, without any governmental safeguards. If a dispute arises, there is no domestic complaints process and no compensation scheme backing the ticket. Therein lies the industry lobbying pitch again: the ban is not stopping the activity. It is merely depriving the activity of adequate consumer and business safety protection.
Until a rule changes, the official UK position remains the 2019 ban. Talks can, and likely will, run for months without any noticeable signs of progress. The next useful signal will be a consultation title, a perimeter-report rewrite, or a sentence stating that financial event contracts will be assessed by risk features rather than by the binary-options stamp. Until then, expect the status quo to preside.
References
1. Helen Cahill, “UK weighs lifting ban on US-style prediction markets,” The Times, 4 September 2026
2. Francisco Rodrigues, “UK regulator weighs easing financial prediction market ban: Times,” CoinDesk, 7 September 2026
3. FCA, PS19/11: Product intervention measures for retail binary options
4. FCA Handbook, COBS 22.4
5. FCA, Binary options scams
6. FCA perimeter report
7. FCA, Discussion Paper DP25/3
8. Brad Enright, “Prediction markets — here’s what you need to know,” Gambling Commission, 4 February 2026
9. Chidubem Ovute, iGaming Today, 7 September 2026
10. Crypto Briefing, 7 September 2026
11. CoinDesk, Kalshi $22 billion valuation
12. CoinDesk, Polymarket $21 billion valuation
13. FM Daily Brief – 3 July 2026 (YouTube)
