Polymarket: Bets on Bank Failures Spark Reactions in London

Polymarket raises new concerns in the UK. The predictive markets platform has recorded nearly $77,500 in bets on the failure of major banks, including HSBC and Lloyds. In light of the risk of manipulation and bank panic, a British MP is calling for regulatory intervention. Polymarket, for its part, defends the utility of these markets.

In Brief

• Approximately $77,500 has been wagered on the failure of major banks by the end of the year, including HSBC, Lloyds, JPMorgan, and BNP Paribas.
• MP Bobby Dean is urging British regulators to engage with their American counterparts and mentions a risk of a bank run.
• The FCA states it is in discussions with international regulators; HSBC and Lloyds have not commented.

An MP Calls for Intervention

Predictive markets are gaining traction, but their development raises new regulatory questions. Following the tightening of the European stance against Polymarket and Kalshi, bets on bank failures are now attracting the attention of British authorities.

On Polymarket, users have wagered nearly $77,500 on the potential failure of several major international banks, including JPMorgan, BNP Paribas, HSBC, and Lloyds, before the end of the year.

This situation worries Bobby Dean, a Liberal Democrat MP and member of the British Treasury Committee. He believes that the platform's oversight gaps could facilitate manipulation and amplify panic movements in the markets.

The MP is thus calling on British regulators to reach out to their American counterparts. For its part, the Financial Conduct Authority (FCA) indicates that it is already in discussions with international authorities to preserve market integrity. The Bank of England is also monitoring emerging risks. So far, HSBC and Lloyds have not responded.

Polymarket Defends Its Market

Polymarket rejects the alarmist interpretation. "The information in these markets is already public," argues its legal director Neal Kumar, who believes that banks and funds have long had access to CDS markets. Expanding this access even contributes to the fight against misinformation, he adds.

However, criticism is pouring in, including from the United States. The FDIC, the American deposit insurance agency, has looked into these contracts and the ethical rules for its employees this fall, according to Bloomberg. Its former chair, Sheila Bair, believes they have no social value and encourage actors to stir up rumors and panic.

Senator Elizabeth Warren refers to a "wild west" filled with manipulations. Kalshi, the regulated competitor, does not offer such contracts and deems them "in poor taste."

An Issue That Goes Beyond the UK

Europe is advancing in parallel. The ESMA warned in September that predictive markets are plagued by insider trading, citing portfolios created just before the conflict against Iran in February, or the American soldier charged with betting on Nicolás Maduro's arrest.

The platform is already blocked in France, where the 2027 presidential election is attracting bets through workarounds. In response to criticism, the platform has introduced voluntary deposit limits and blocks.

Nonetheless, the legitimacy trial is also played out in words. Supporters see it as a counter-power to rumors, while detractors view it as a moral hazard. A duel that the current events in predictive markets document every week.

The amounts remain modest compared to traditional financial markets. It is the trajectory that worries more than the current size. Legal troubles are accumulating, such as Kalshi's recent defeat on appeal regarding its sports contracts. The next important decision could come from Washington, where the CFTC claims its jurisdiction against lawmakers calling for stricter rules.