Prediction Markets: Legal Gray Zone for German Users of Polymarket and Kalshi

While prediction markets like Polymarket and Kalshi are recording record volumes internationally, German users are operating in a legal gray zone. The platforms enable betting on real-world events – from election results to macroeconomic data to social media activities of prominent figures.

Users purchase binary contracts whose price reflects the market's estimated probability of an event occurring. A contract priced at 63 cents corresponds to approximately a 63 percent probability. The contracts can be traded at any time, enabling short-term speculative gains.

Contrary to expectations, Polymarket did not disappear following the 2024 US election. Google's announcement that it will display probability data from these platforms in search results has generated additional attention. Many observers view prediction markets as a "collective oracle" that uses financial incentives to aggregate information more effectively than traditional polls.

The problem: The platforms are not regulated in Germany. Betting on events such as elections is subject to strict regulations here. According to inquiries made to the German Financial Supervisory Authority (BaFin), the Federal Ministry of Justice, and gambling authorities, German users potentially face fines or criminal consequences. ^[1]