Source: Radio New Zealand
Prediction markets are where punters wager money on the possibility of future events – but New Zealand is declaring some of them illegal. Andrey Popov / 123rf
Explainer – New Zealand has cracked down on two hugely popular online prediction markets, declaring them illegal here.
The Polymarket and Kalshi platforms are valued at billions of dollars, but the Department of Internal Affairs (DIA) has now ordered them to stop providing services to Kiwis.
“To avoid breaching New Zealand law, they must cease offering services to New Zealanders,” Vicki Scott, director of gambling for the DIA, told RNZ.
Here’s what you need to know about the world of prediction markets and how it’s changing in New Zealand.
What exactly are prediction markets, anyway?
Basically, it’s where people place bets on the future – that could be sports, politics, weather – even whether or not Jesus Christ might return before 2027.
Polymarket is the big dog in the arena, but there are many other sites, and they’re particularly popular among younger people. Billions of dollars in trading volume was seen during the recent American Super Bowl – not just the game, but things like what musician Bad Bunny would do during his halftime show.
“Any number of things have now been gamified and monetised and turned into basically a casino,” Bobby Allyn, a technology correspondent for America’s National Public Radio, told RNZ’s Afternoons recently.
“Prediction markets are apps where you can wager money on sports, on the outcome of say, a press conference – what will someone say at a press conference … even things like how many people will die of famine in Gaza this year, what will President Trump do in Venezuela now that Maduro has been toppled.”
Some of the big bets doing the rounds this week include whether the former Prince Andrew will be sentenced to prison and when or if the United States might launch a military strike against Iran. But it can even get as granular as what exact words a politician might say in a speech, in “mention markets”.
Polymarket offers option on a wide variety of events. Screenshot
There are New Zealand predictions in the mix, such as one on Kalshi over who will win November’s election, or wagers on Polymarket on what the Reserve Bank will decide in future Official Cash Rate announcements.
Kalshi co-founder and chief executive Tarek Monsour has said: “The long-term vision is to financialise everything and create a tradable asset out of any difference in opinion.”
New Zealanders have used the platforms and there are many variations of them, not all of which wager money. An Auckland engineer recently told The Spinoff that the appeal of betting on outcomes “makes me feel more engaged and connected to events, because I want to see how things go”.
So is it just a forecasting tool or is it officially gambling?
What has the government decided?
The DIA has weighed in to say these platforms are indeed a kind of gambling under New Zealand laws.
“Prediction markets such as Polymarket and Kalshi are caught by both the Gambling Act 2003 and the Racing Industry Act 2020,” Scott said.
“They both offer products that meet the general definition of ‘gambling’ and the more specific definition of ‘bookmaking’ in the Gambling Act. They are accordingly prohibited under the Gambling Act.”
Scott said that “the surge in popularity and growth of prediction markets means time is right to take a clear regulatory stance”.
The government has sent letters to the companies asking them to prevent access in New Zealand.
Other countries like Australia and the UK have taken similar positions.
One of the big legal debates going on world-wide is whether these sites actually are gambling sites. Multiple lawsuits are playing out in America. The Trump administration has so far tended to back the prediction markets.
And then there are competitors such as Manifold, which uses its own “play” currency Mana instead of betting money.
Screenshot
“Those involved say they’re not gambling,” NPR’s Allyn said.
“They say these apps are placing a bet on a future outcome. But, I mean, look, if I were to explain to you in detail how this works and then you compare this to a casino I think you’d basically say there’s virtually no difference. I think it’s very fair to say that this is just a new tech-powered version of gambling.
“It’s a classic sort of tech company move to say ‘we’re not the thing that you think we are because we want to avoid the regulations.’”
Prediction websites aren’t entirely new, of course. In New Zealand, the iPredict site produced by Victoria University of Wellington ran from 2008 to 2015.
It closed not because it was decreed a gambling site, but instead after former Associate Justice Minister Simon Bridges refused to grant it an exemption from the Anti-Money Laundering and Countering Financing of Terrorism Act, declaring that it was a “legitimate money laundering risk”.
New Zealand Initiative chief economist Eric Crampton said that back then, iPredict wasn’t being held to the standards prediction markets are now by the DIA.
“Deciding that prediction markets are necessarily gambling, however, is inconsistent with New Zealand’s prior authorisation of iPredict. It also shuts Kiwis out of an emerging financial market sector.
“iPredict, like other prediction markets, provided remarkably accurate predictions on future events like election outcomes, inflation outcomes, and interest rate decisions. It ended in 2015 not because it was considered gambling, but because it was too small to be able to afford to comply with new regulations that were mainly aimed at banks.”
Scott said the Financial Markets Authority and Problem Gaming Foundation were consulted and supportive of the DIA’s stance.
“I note that neither Kalshi nor Polymarket applied to the FMA for consideration or licensing of their products,” she said.
Crampton said electronic trading companies such as Tradeweb are increasingly working with prediction markets like Kalshi, and Allyn also noted that “they also are partnering with pretty huge institutions on Wall Street”.
“I expect that new hybrid financial instruments will soon be developed combining prediction market contracts and traditional financial market contracts,” Crampton said. “Regulating this space as gambling makes little sense.”
CNN has partnered with prediction market Kalshi in some coverage. CNN / Screenshot
So are they really predicting the future?
Betting odds for Polymarket and Kalshi have seeped into the real world. Allyn said such reporting can influence actual events.
“Right now we’re seeing a number of awards shows, a number of news organisations like CNN using the odds of prediction markets as part of their broadcast.
“These Polymarket odds are just mostly young men speculating on Discord and Reddit about what they think is going to happen – I mean, it’s pure speculation. When odds move up or down in some way it’s just a bunch of young people in basements slamming on their phones $10 here, $10 there, I don’t really see how this is providing something that’s more authoritative and more credible than polls.”
But as a counterpoint, Crampton called such descriptions clueless.
“Prediction markets prove remarkably accurate, providing regular updated data in areas where official forecasts are few and far between. The (US) Federal Reserve recently published a working paper based on Kalshi data, showing both the accuracy of Kalshi’s prices and their importance as leading financial market indicators.”
Researchers have found that speculators make markets more accurate, he said.
“Informed traders then have a stronger incentive to work hard at figuring out accurate prices, because they have people to trade with.”
Crampton cited an example in the 2024 US presidential election where a trader won big betting on Trump winning, by looking at polls that asked people who they thought their neighbours would vote for.
“From that he learned that Trump was (sadly) far more popular than the polls expected. He bought a lot of contracts that would pay out if Trump won, moving the prices to reflect that reality. And he was rewarded for his efforts.”
Polymarket buyers tried to predict what US President Donald Trump might say during the State of the Union. Screenshot
Does this only cover Polymarket and Kalshi?
The two companies have been specifically called out, but the decision sets a precedent for others in the prediction market space in New Zealand.
“The issues are not specific to Polymarket and Kalshi, although they are the biggest players in this space currently,” Scott said. “We will take a similar approach to other providers as they arise.”
“The approach we have taken aligns with our approach to overseas betting operators (including many well-known international brands) who have been advised they must withdraw immediately from the NZ market.
“Most have complied, geo-blocking their sites. In our view there’s no reason why prediction markets should be treated any differently.”
What did the platforms say?
The DIA sent letters to both Kalshi and Polymarket, informing them their services were illegal and they must prevent them from being accessed by people in New Zealand.
“Whilst neither have formally responded, Kalshi responded almost immediately by deactivating customer accounts and preventing new accounts,” Scott said this week.
“Polymarket do not appear to have taken any action, and we will be following up with them directly.”
Is online gambling legal at all in New Zealand?
At the moment, only TAB New Zealand can legally offer online race and sports betting.
Currently it’s legal to try your luck on offshore casino gambling sites, according to the DIA, but online casinos based in New Zealand are illegal and it’s illegal to advertise offshore casino gambling websites in New Zealand. Safer Gambling Aotearoa warns to use those sites “at your own risk”.
The Online Casino Gambling Bill, which would regulate and license up to 15 offshore casino operators, is currently progressing through Parliament.
The bill “will introduce a regulatory system for online gambling in New Zealand, which will prioritise harm minimisation, consumer protection, and tax collection,” Minister of Internal Affairs Brooke Van Velden said in introducing the legislation last year.
screenshot
What happens if I find a way to still use Polymarket or similar sites?
Scott warns that it’s risky.
“New Zealanders who engage with Polymarket should do so with caution. There will be no recourse through the gambling regulator if things go wrong and there appears to be no harm minimisation protections in place.”
However, Crampton said that he felt the sites were legitimate enterprises.
“Kalshi at least is (United States Commodity Futures Trading Commission)-authorised and CFTC-regulated. And I have never heard of payout issues at Polymarket.
“There are the occasional problems that every prediction market has in contract interpretation; iPredict had those too. Even if everyone is diligent and well-intentioned, sometimes the world moves in ways that make it hard to interpret whether a contract should pay out at $1 or at $0. It’s rare, but occasionally unavoidable.”
While Polymarket and Kalshi are now considered illegal in New Zealand, Scott said the DIA will not be going after individual users.
“Although it is technically an offence to participate in illegal gambling, we will not be looking to penalise those engaging with these platforms, our focus is on the platforms themselves.”
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
