UK urged to act over Polymarket bets on HSBC and Lloyds failure

UK politicians and experts have urged regulators to respond after Polymarket accepted bets on whether HSBC, Lloyds Banking Group and other major banks will fail by the end of the year.

Users placed $77,507 (£58,530) in positions on the outcome. JPMorgan and BNP Paribas were also included.

FCA discusses prediction markets

The UK Financial Conduct Authority said it had been speaking with international regulators about prediction markets as part of efforts to protect market integrity.

Bobby Dean, a Liberal Democrat member of the Treasury committee, said British authorities should contact their US counterparts. He warned that the contracts could be used to intensify real shifts in market sentiment and, if activity grew, potentially contribute to bank runs.

Polymarket rejected concerns about the bets themselves. Its chief legal officer, Neal Kumar, said the platform gave a wider audience access to information previously used mainly by banks, hedge funds and credit professionals.

European regulator flags abuse risks

The European Securities and Markets Authority said prediction markets face rising risks of insider trading and manipulation, particularly on distributed-ledger platforms with limited identity verification.

The regulator’s report cited cases in which newly created crypto wallets reportedly made $1.2m in profits before information about a US-Israeli military operation against Iran became public. It also said a US soldier was criminally charged with using classified information to place bets before the January capture of Nicolás Maduro.

Polymarket operates on a blockchain, with accounts linked to crypto wallets. The wallets can be publicly traced but are difficult to connect to individuals; users in restricted countries can sometimes bypass the rules through VPNs.

The Bank of England said its supervisors regularly discuss market developments and emerging risks with companies. HSBC and Lloyds declined to comment, while the Treasury did not respond to requests for comment.