Regulatory Risks and Resilience in the Prediction Markets Sector: Assessing the Long-Term Viability of Unlicensed Platforms Amid Global Crackdowns

The prediction markets sector, once hailed as a frontier of financial innovation, now faces a crossroads defined by regulatory scrutiny and operational adaptation. Platforms like Polymarket and Kalshi, which leverage blockchain technology to enable decentralized betting on geopolitical, economic, and cultural events, have drawn sharp attention from regulators in the U.S., Europe, and Asia. This article examines the regulatory risks confronting unlicensed prediction market platforms, evaluates their resilience strategies, and assesses whether these platforms can survive-and even thrive-in an increasingly hostile global environment.

Global Regulatory Landscape: A Fragmented and Hostile Terrain

The past two years have seen a surge in regulatory actions against unlicensed prediction market platforms. In October 2025, Romania's National Office for Gambling (ONJN) blacklisted Polymarket under its gambling laws, citing violations such as poor fiscal reporting, lack of player protections, and insufficient AML oversight, according to LiveBitcoinNews. This decision mirrored actions in France, Belgium, Singapore, and Thailand, where authorities have similarly restricted access to the platform. The Romanian crackdown underscores a broader trend: regulators are increasingly treating prediction markets as gambling operations rather than financial derivatives, even when bets are denominated in cryptocurrency.

In the U.S., the regulatory battle is more nuanced. Kalshi, a platform operating under a CFTC Designated Contract Market (DCM) license, has faced pushback from state gaming commissions. New York, Arkansas, and Illinois have issued cease-and-desist orders, arguing that Kalshi's event contracts constitute unlicensed gambling, according to Yahoo Finance. This conflict highlights a critical jurisdictional ambiguity: while the CFTC claims authority over derivatives, state regulators assert control over gambling. The lack of a unified framework has created a patchwork of compliance requirements, forcing platforms to navigate a minefield of conflicting rules.

Asia's approach is equally restrictive. In the Philippines, legal experts have clarified that prediction markets are explicitly prohibited under the Revised Penal Code, with no pathway for legalization in the short term, as reported by Asgam. Political betting, in particular, is barred under election laws, further complicating the sector's growth. These regional disparities suggest that unlicensed platforms must either adapt to localized regulations or risk permanent exclusion from key markets.

Adaptation Strategies: Compliance, Acquisition, and Resilience

Faced with mounting regulatory pressure, platforms like Polymarket have adopted aggressive compliance strategies to remain operational. In November 2025, Polymarket acquired QCX, a CFTC-licensed derivatives exchange and clearinghouse, to "legalize via acquisition," according to a Superex analysis. This move allowed the platform to re-enter the U.S. market with a focus on sports betting-a product with clearer regulatory boundaries in certain jurisdictions. By aligning with existing licensing frameworks, Polymarket aims to navigate the federal-state regulatory divide while expanding its user base.

Other adaptation strategies include modular platform design, real-time regulatory technology (RegTech) for monitoring compliance, and proactive engagement with regulators. For instance, Polymarket has emphasized robust AML/KYC measures and transparent contract settlement mechanisms to address concerns raised by Romanian and U.S. authorities, as noted in the Superex analysis. These steps reflect a broader industry shift toward operational resilience, where platforms prioritize legal clarity over rapid expansion.

However, compliance is not a panacea. Acquiring licenses and implementing safeguards require significant capital and time, which may deter smaller competitors. Moreover, regulators in jurisdictions like Romania and the Philippines show little tolerance for platforms that fail to secure local licenses, regardless of their compliance elsewhere.

Future Outlook: Can Unlicensed Platforms Survive?

The long-term viability of unlicensed prediction market platforms hinges on two factors: regulatory harmonization and technological innovation. On the regulatory front, an FSB thematic review has noted persistent gaps in global crypto-asset oversight, with uneven enforcement enabling regulatory arbitrage. While 70% of jurisdictions representing 70% of global crypto exposure have made strides in implementing regulations, inconsistencies remain, according to a TRM Labs report. Platforms may exploit these gaps by relocating to less stringent jurisdictions, but this risks reputational damage and operational instability.

Technologically, emerging tools like AI-driven trading agents and tokenized assets could redefine the sector. AI agents, for example, are already being used for automated trading and yield maximization, creating new use cases that regulators may struggle to categorize, as discussed in a CryptoResearch forecast. However, these innovations also introduce risks-such as market manipulation-which could prompt stricter oversight.

Conclusion

The prediction markets sector is at a pivotal moment. While unlicensed platforms like Polymarket and Kalshi have demonstrated resilience through strategic acquisitions and compliance measures, their survival depends on navigating a fragmented regulatory landscape. As governments prioritize consumer protection and financial stability, the sector must balance innovation with adherence to evolving rules. For investors, the key takeaway is clear: regulatory risks remain acute, but platforms that adapt proactively-by securing licenses, embracing RegTech, and engaging regulators-may yet carve out a sustainable niche in this volatile space.