What prediction markets are 

A prediction market, also referred to as a prediction market product or PMP, is a platform that allows participants to take binary positions on the outcome of future events. Users are essentially purchasing a contract that pays out if a specific outcome occurs and expires worthless if it does not. The mechanics share characteristics with both betting and financial derivatives, depending on the nature of the underlying event. 

This is where the product category becomes genuinely complex. Prediction markets are not a single type of product. They split into two different categories based on what they are predicting, and those two categories carry entirely different regulatory implications in the UK. 

Non-financial prediction markets take positions on outcomes that are not connected to financial instruments or markets. Elections, sporting results, political developments, and social outcomes all fall into this category. A user might take a position on the result of a general election, on which party will win a particular constituency, or on a sporting result. The mechanics are those of a wager, and in the UK these products are treated accordingly. 

Financial prediction markets operate differently in character, even if the binary contract structure looks similar on the surface. These products allow users to take positions on financial outcomes: whether a company will reach a particular valuation, whether a market index will exceed a threshold, whether an economic indicator will fall within a given range. The event being predicted is rooted in financial market activity rather than a real-world outcome. 

That distinction has direct and material consequences for how each product type is regulated and how payments for it can be processed.

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The UK regulatory landscape 

Two UK regulators have now published clear positions on prediction markets, and they address different halves of the product category. 

The Gambling Commission addressed non-financial prediction markets in a February 2026 blog post authored by its director of strategy. The Commission's position is clear: prediction market platforms as currently structured fall within the definition of a "Betting Intermediary" under UK legislation. Operators without a licence should not be targeting UK consumers, and criminal offences apply to those operating without an appropriate licence. The Commission drew an explicit comparison to betting exchanges, which have operated within its regulatory framework since 2000.¹ 

The Financial Conduct Authority's March 2026 perimeter report covers financial prediction markets, and its position is equally clear. The FCA distinguishes explicitly between prediction markets on non-financial events, which it agrees fall under the Gambling Commission, and those referencing financial or climatic events. For the latter, the FCA's view is that these products constitute binary options. As such, they remain subject to the FCA's permanent ban on the sale, marketing, and distribution of binary options to retail consumers, which has been in place since March 2019.² ³ 

The regulatory picture is therefore one of bifurcation. The category of underlying event determines which regulator applies, which framework governs the operator, and in the case of financial prediction markets, whether the product can legally be offered to UK retail consumers at all. The FCA perimeter report also notes that financial spread betting falls within its regulatory perimeter under MiFID regulation, while sports spread betting may require its own distinct framework given that existing financial regulation was not designed to address gambling activity.² 

Both regulators have published explicit statements within the last several months. And yet the payment infrastructure that prediction market operators would need to access has no equivalent clarity. That gap is where the practical problem lives. 

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The payment infrastructure challenge 

Understanding why payment acceptance for prediction markets is unresolved requires understanding how the bodies that shape it actually relate to one another. 

The Gambling Commission licences and regulates the operator. Its authority extends to the conduct of the gambling business and the protections owed to consumers within it. It does not regulate the financial institutions that process payments for those businesses. 

The FCA regulates payment institutions, banks, and acquirers under the Payment Services Regulations. Its remit covers how those firms manage risk, make underwriting decisions, and treat customers in the context of payment processing. The FCA and Gambling Commission maintain a formal Memorandum of Understanding covering areas of shared interest, but coordination between regulators is not the same as shared jurisdiction over payment processing. 

Card networks operate independently of both. The schemes set their own operating rules, including Merchant Category Code designations, through their network regulations. Acquirers must comply with those rules as a condition of scheme membership. Neither the FCA nor the Gambling Commission has direct authority over how the schemes classify a merchant category, what processing costs they attach to it, or what compliance requirements they impose on merchants within it. 

For a prediction market that falls under Gambling Commission oversight, the card schemes have issued no specific guidance on classification. In that vacuum, acquirers must make individual judgments, and the most defensible default available to them is MCC 7995, the global Merchant Category Code for gambling and wagering. It is the obvious choice and, absent direction from the schemes, arguably the only defensible one. But it is a choice made in the absence of information, not on the basis of it. 

MCC 7995 was not designed with prediction markets in mind. It was not designed with the current state of regulated UK gambling in mind either. Independent research commissioned by PXP, drawing on interviews with gambling merchants, acquirers, banks, and schemes, found that regulated gambling merchants operating under MCC 7995 pay processing costs of between 60 and 90 basis points, compared to 40 to 60 basis points for mainstream high-street merchants at equivalent scale.⁴ Their actual fraud rates, at an estimated 0.01% to 0.03%, are among the lowest of any UK merchant category.⁴ The UK-wide chargeback rate across all industries has been estimated at as high as 0.6%.⁵ The cost structure under MCC 7995 does not reflect those realities. It reflects a classification that has not been updated to account for how the industry has changed.

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A microcosm of a much larger problem 

Prediction markets are not unique in facing this kind of complexity. They are simply a current and visible example of a dynamic that plays out across the gambling industry more broadly. 

The gambling sector encompasses an enormous range of product types, operating models, and risk profiles. A licensed lottery operator, a regulated online sportsbook, a betting exchange, a casino, a bingo operator and a prediction market platform are all different businesses with different customer relationships, different fraud and chargeback characteristics, and different relationships with regulators. From a payment infrastructure perspective, they are frequently treated as the same. 

MCC 7995 serves as a near-blanket classification across this range, applied equally to highly regulated operators who have invested heavily in bank-grade KYC, AML monitoring, and consumer protection infrastructure, and to operators with no UK licence and no consumer protections at all. The research makes the point plainly: the current failure within the ecosystem to distinguish between reputational risk and genuine payments risk serves no one well.⁴ It does not help acquirers make accurate underwriting decisions. It does not help banks apply proportionate fraud rules. It does not help merchants price or plan for payment acceptance costs. And it does not help consumers, who face unnecessary friction and higher costs passed through from an infrastructure that has been calibrated to a risk profile that does not reflect the current state of the industry. 

Prediction markets, sitting at the intersection of gambling and financial products, inherit all of that complexity and then add more. An operator building a prediction market product for the UK market must determine which regulatory framework applies to its product, confirm whether that framework permits it to operate at all, obtain the appropriate licence or authorisation, and then attempt to find acquirers willing to process for a business model the card schemes have yet to specifically address. Each of those steps requires specialist knowledge that is spread across regulatory, legal, and payment functions that rarely talk to one another in a joined-up way. 

The result is that well-structured, compliant businesses end up scrambling for payment infrastructure that should, in a well-functioning ecosystem, be straightforwardly available to them. 

What a more functional ecosystem would look like 

The solution to this is not simple, and it does not rest with any single participant in the payment chain. But the direction is clear enough. Classification frameworks need to keep pace with product evolution. Scheme guidance on emerging categories should be proactive rather than reactive. The distinction between reputational risk and actual payment risk needs to be recognised more consistently across banks, acquirers, and schemes. And businesses operating in complex verticals need payment infrastructure partners who understand the landscape in detail, not just the broad category. 

PXP has spent more than 25 years building payment infrastructure for the gaming and gambling industry. That history means we understand the regulatory texture of this space, the acquirer relationships that make processing viable for complex business models, and the risk and fraud architecture that high-risk MCC categories require. For operators entering prediction markets, or any other emerging product category that sits at the edge of existing frameworks, that depth of experience is not a secondary consideration. It is the starting point. 

Sources 

¹ Brad Enright, "Prediction markets — here's what you need to know," Gambling Commission, 4 February 2026. gamblingcommission.gov.uk/blog/post/prediction-markets-heres-what-you-need-to-know 

² Financial Conduct Authority, Perimeter Report, March 2026. fca.org.uk/publications/corporate-documents/fca-perimeter-report 

³ Financial Conduct Authority, "PS19/11: Product intervention measures for retail binary options," March 2019. fca.org.uk/publications/policy-statements/ps19-11-product-intervention-measures-retail-binary-options 

⁴ "Time for a Level Playing Field for Regulated UK Gambling Payments," Piran Consulting Ltd., 2025/2026. Research commissioned by PXP Financial Limited. The findings and conclusions are those of Piran Consulting. Download the full whitepaper here. 

⁵ The Payments Association, UK chargeback rate data, as cited in "Time for a Level Playing Field for Regulated UK Gambling Payments," Piran Consulting Ltd., 2025/2026.