Prediction Markets and Information Betting in South Korea: Legal Status, Polymarket, Kalshi, and Regulatory Framework

Prediction markets have emerged as one of the most controversial intersections of finance, technology, and gambling law in the 2020s. Platforms like Polymarket and Kalshi allow users to trade contracts on real-world events, from elections and economic indicators to entertainment awards and geopolitical developments. While proponents argue these markets serve valuable informational functions by aggregating dispersed knowledge into accurate forecasts, South Korean law treats them as unambiguously illegal gambling.

This comprehensive guide examines prediction markets through the lens of Korean gambling regulation, exploring why these information markets face the same legal prohibitions as traditional gambling despite their distinct economic characteristics. For Korean citizens curious about platforms they may encounter online, understanding the legal framework is essential before any engagement.

What Are Prediction Markets?

Definition and Economic Function

Prediction markets, also called information markets or event futures, are exchange-based platforms where participants trade contracts whose payoffs depend on the outcomes of real-world events. Unlike traditional betting where odds are set by bookmakers, prediction market prices emerge from the aggregate trading activity of many participants, theoretically reflecting the crowd's collective wisdom about event probabilities.

According to research published in the journal Science, prediction markets have demonstrated remarkable accuracy in forecasting elections, economic indicators, and other outcomes, often outperforming expert predictions and polls. This informational efficiency is the primary argument advocates use to distinguish prediction markets from gambling.

The core mechanics involve binary outcome contracts. For example, a contract might pay 1,000 won if Candidate A wins an election and 0 won otherwise. If the current market price is 600 won, this implies participants collectively estimate a 60% probability of Candidate A winning. As new information emerges, prices adjust, providing real-time probability estimates that policymakers, businesses, and researchers can utilize.

Major International Prediction Platforms

Several platforms have gained prominence in the global prediction market space:

• Polymarket: A cryptocurrency-based prediction market operating on blockchain technology. Polymarket gained massive attention during the 2024 US presidential election, with billions of dollars in trading volume. It operates primarily in USDC stablecoin and is accessible globally, though it formally restricts US users.
• Kalshi: A regulated US prediction market exchange licensed by the Commodity Futures Trading Commission (CFTC). Kalshi offers "event contracts" on topics including economic data releases, weather events, and after legal battles, US elections. It operates within traditional financial infrastructure with KYC requirements.
• Metaculus: A forecasting platform focused on scientific and technological predictions. While Metaculus uses reputation points rather than real money, it demonstrates the informational value proposition of prediction mechanisms without gambling elements.
• PredictIt: An academic prediction market operated by Victoria University of Wellington with a CFTC no-action letter (now revoked). PredictIt imposed strict position limits and operated as a research tool for studying information aggregation.

The Gambling-Information Market Debate

Advocates argue prediction markets differ fundamentally from gambling in several ways. First, they claim prediction markets serve a social function by generating accurate probability estimates useful for decision-making, unlike casino games designed purely for entertainment. Second, prediction market participation theoretically rewards informed analysis rather than luck, as traders with superior information or analysis can profit consistently. Third, prices incorporate dispersed information from many participants, producing forecasts that can exceed individual expert predictions.

Critics and regulators, including Korean authorities, counter that the distinction is largely semantic. Both activities involve wagering money on uncertain future outcomes. Both can lead to financial losses and addictive behaviors. The claimed informational benefits do not change the fundamental gambling character of the activity. As explored in our gambling neuroscience guide, the brain's reward systems respond similarly to gambling and trading activities involving uncertain outcomes and potential gains.

Korean Legal Framework for Prediction Markets

Criminal Act Provisions

South Korea's prohibition on gambling is rooted in Articles 246-249 of the Criminal Act. Article 246 defines gambling as "betting money or other property on the outcome of a chance event." This definition is interpreted broadly to encompass any wagering on uncertain future events, regardless of how the activity is labeled or marketed.

The law does not distinguish between gambling for entertainment and gambling for information purposes. A prediction market contract paying out based on election results is legally equivalent to betting on sports outcomes or casino games. The presence of skill, analysis, or informational value does not provide a legal defense. As detailed in our Korean gambling law guide, the only legal exceptions are specifically authorized activities: government lotteries, racing bets, and Kangwon Land casino.

For Korean citizens, prediction market participation triggers the same penalties as other forms of illegal gambling:

• Simple gambling: Fine up to 5 million won or imprisonment up to 3 years
• Habitual gambling: Imprisonment up to 3 years or fine up to 20 million won
• Operating gambling establishments: Imprisonment 3-5 years

Extraterritorial Application

A critical aspect of Korean gambling law is its extraterritorial reach. Korean citizens can be prosecuted for gambling activities conducted abroad or through offshore online platforms. This applies fully to prediction markets operated by foreign companies like Polymarket or Kalshi, even when accessed from outside Korean territory.

Our enforcement guide documents numerous cases where Korean citizens faced prosecution for overseas gambling activities. The same legal framework applies to prediction market participation. The use of cryptocurrency or anonymous platforms does not provide legal protection, as discussed in our cryptocurrency gambling analysis.

Information and Communications Network Act

Beyond the Criminal Act, the Act on Promotion of Information and Communications Network Utilization and Information Protection provides additional legal tools for addressing online gambling, including prediction markets. Korean authorities can:

• Block access to gambling websites at the ISP level
• Require search engines to de-index gambling-related content
• Prosecute individuals who advertise or facilitate access to illegal gambling platforms
• Compel financial institutions and payment processors to block transactions to gambling services

Major prediction market platforms like Polymarket may be subject to website blocking in Korea, though technical circumvention through VPNs remains possible. However, using circumvention tools does not change the legal status of the underlying activity. As documented in our gambling advertising guide, Korean authorities actively pursue those who promote illegal gambling platforms.

Cryptocurrency and Blockchain Prediction Markets

The False Promise of Anonymity

Many prediction market users assume cryptocurrency-based platforms provide anonymity that shields them from legal consequences. This assumption is increasingly dangerous. Korean authorities have developed sophisticated capabilities for blockchain analysis, and cooperation agreements with cryptocurrency exchanges create audit trails that can expose users.

Under the Virtual Asset User Protection Act, Korean cryptocurrency exchanges must implement real-name verification through bank partnerships. The "travel rule" requires exchanges to share sender and recipient information for transactions above threshold amounts. When users convert cryptocurrency to won or vice versa through Korean exchanges, their activities become traceable.

Blockchain analysis firms can trace transaction flows across wallets, linking pseudonymous addresses to identified individuals through exchange touchpoints. Our cryptocurrency gambling guide provides detailed analysis of how Korean enforcement agencies utilize these tools.

Decentralized Prediction Market Protocols

Decentralized prediction markets operating on smart contracts, such as those built on Ethereum or other blockchain platforms, present novel regulatory challenges. These protocols operate without central operators who could be prosecuted or compelled to block users. However, the legal status for Korean users remains unchanged.

The act of gambling is illegal regardless of the platform architecture. Decentralization affects enforceability rather than legality. Users who access decentralized prediction markets are still violating Korean law, even if prosecution may be more difficult. The legal risk falls primarily on individual users rather than platform operators in these cases.

Stablecoins and Fiat-Equivalent Value

Prediction markets like Polymarket primarily use stablecoins such as USDC, which maintain 1:1 value with the US dollar. Korean law treats cryptocurrency gambling the same as fiat gambling. The denomination of stakes in cryptocurrency rather than won does not provide any legal distinction or protection.

In fact, the conversion process between won and cryptocurrency creates additional evidence trails that prosecutors can use. Users who deposit won to Korean exchanges, convert to cryptocurrency, transfer to prediction market wallets, and later withdraw winnings create documented transaction chains.

Specific Event Types and Legal Analysis

Election and Political Betting

Political prediction markets have received the most attention globally, with Polymarket processing billions of dollars in election-related contracts. For Korean citizens, betting on any election, whether Korean, American, or other, constitutes illegal gambling.

Political betting carries additional concerns beyond standard gambling law. Korean election laws impose strict limits on campaign activities and information manipulation. While prediction market participation by individuals is primarily a gambling violation, any organized effort to use prediction markets to influence Korean election perceptions could trigger additional violations.

The National Election Commission monitors election-related activities closely. Unlike some countries where election betting operates in gray zones, Korean law provides no ambiguity: betting on political outcomes is illegal gambling.

Economic and Financial Event Contracts

Platforms like Kalshi offer contracts on economic data releases such as inflation rates, unemployment figures, interest rate decisions, and GDP growth. These contracts superficially resemble financial derivatives, which are legal when properly regulated.

However, Korean law would likely classify these as gambling rather than legitimate financial instruments. The key distinction lies in regulatory authorization. Futures and options traded on authorized Korean exchanges like the Korea Exchange (KRX) are legal financial products. Event contracts offered by unauthorized foreign platforms are gambling regardless of their economic similarity to derivatives.

For comparison, our trading addiction guide examines how speculative financial trading can exhibit gambling-like characteristics even when legally conducted through authorized channels.

Sports, Entertainment, and Cultural Events

Prediction markets covering sports outcomes, entertainment awards, or cultural events fall clearly within gambling prohibitions. These categories overlap most directly with traditional sports betting, which is extensively regulated and mostly prohibited in Korea.

The only legal sports betting in Korea is through Sports Toto, the government-operated system. All private sports betting, including through prediction market mechanisms, is illegal. Betting on entertainment events like Academy Awards or music chart positions has no legal pathway in Korea.

Scientific and Technological Predictions

Some prediction platforms focus on scientific or technological forecasting, such as AI development timelines, climate milestones, or space exploration achievements. While these may seem furthest from traditional gambling, the legal analysis remains the same under Korean law.

If real money is wagered on uncertain outcomes, the activity constitutes gambling regardless of the subject matter's scientific interest. Play-money prediction platforms like Metaculus that use reputation points rather than monetary stakes would not violate gambling laws, as no gambling occurs without real stakes.

Comparative International Approaches

United States Regulatory Evolution

The US approach to prediction markets has evolved significantly. The Commodity Futures Trading Commission (CFTC) has primary regulatory authority over event contracts. After years of legal battles, Kalshi won court approval to offer election contracts, though regulatory appeals continue.

The US model treats prediction markets as financial products subject to CFTC oversight when properly registered, while state gambling laws may apply to unregistered platforms. This regulatory framework does not exist in Korea, where all prediction market activity falls under gambling law.

European Approaches

European Union member states have varied approaches. Some countries permit licensed betting operators to offer prediction-style products under gambling licenses. Others prohibit prediction markets entirely. The EU's Markets in Financial Instruments Directive (MiFID II) may apply to some event contracts, creating regulatory complexity.

The UK Gambling Commission licenses operators that offer political and event betting, treating prediction markets as a betting category. This contrasts sharply with the Korean prohibition.

Asian Regional Comparison

As explored in our Korea vs Japan comparison, Asian jurisdictions generally maintain strict gambling prohibitions. Japan prohibits private gambling but authorizes public betting on racing and lottery systems, similar to Korea's approach. Neither country has created legal pathways for prediction markets.

Singapore, which permits licensed casino gambling for foreigners and citizens (with levy requirements), has not authorized prediction markets. The regulatory trend across Asia favors restricted, government-controlled gambling rather than market-based prediction systems.

Regulatory Arguments For and Against

Advocates for prediction market legalization cite several arguments documented in academic literature from institutions like the Brookings Institution:

• Information value: Prediction markets generate accurate probability estimates useful for policy planning and business decisions
• Price discovery: Market mechanisms aggregate dispersed information more efficiently than surveys or expert panels
• Accountability: Public prediction markets create accountability by making forecasts transparent and tradeable
• Harm reduction: Regulated prediction markets may be safer than unregulated alternatives

Opponents, including Korean regulators, counter with concerns about:

• Gambling harms: Prediction markets can cause the same addiction and financial damage as other gambling forms
• Market manipulation: Participants may have incentives to influence real-world outcomes they have wagered on
• Regulatory arbitrage: Prediction markets may be used to circumvent gambling or securities regulations
• Social values: Betting on certain outcomes (deaths, disasters, elections) raises ethical concerns

Enforcement Challenges and Realities

Detection and Investigation Methods

Korean enforcement agencies face practical challenges in detecting prediction market participation. Unlike domestic gambling operations that can be raided, offshore platforms operate beyond direct Korean jurisdiction. However, several enforcement pathways exist:

• Financial monitoring: The Korea Financial Intelligence Unit (KoFIU) monitors suspicious transactions, including patterns suggesting gambling-related cryptocurrency movements
• Exchange cooperation: Korean cryptocurrency exchanges are required to report suspicious activities and comply with investigation requests
• Platform data requests: International legal assistance treaties may enable Korean authorities to request user data from platforms in cooperating jurisdictions
• Whistleblower reports: Many gambling cases begin with reports from family members, employers, or disgruntled associates

Prosecution Priorities

Enforcement resources are finite, and Korean authorities prioritize cases involving large amounts, organized operations, or public figures. Individual prediction market users risking small amounts may face lower prosecution probability than those wagering significant sums or operating as part of organized groups.

However, this should not be interpreted as de facto tolerance. Prosecution decisions depend on available evidence, case circumstances, and enforcement priorities at any given time. The legal status remains clear: prediction market participation is illegal.

Our celebrity gambling scandals article documents how public figures face enhanced scrutiny and prosecution for gambling activities that might go unnoticed for ordinary citizens. The potential for reputational damage exists for anyone whose prediction market activity becomes public.

Practical Consequences Beyond Criminal Law

Beyond criminal penalties, prediction market participation can trigger other consequences:

• Employment: Many employers include gambling as grounds for disciplinary action, as detailed in our gambling and employment guide
• Security clearances: Government positions and sensitive corporate roles may be jeopardized by gambling activities
• Immigration: As covered in our gambling and immigration guide, gambling convictions can affect visa status for foreign residents
• Credit and financial services: Gambling-related financial patterns can affect credit assessments and banking relationships
• Family law: Gambling can become relevant in divorce proceedings as explored in our gambling and marriage analysis

Risk Assessment for Korean Citizens

Understanding the Legal Reality

For Korean citizens considering prediction market participation, the legal analysis is straightforward: it is illegal gambling subject to criminal penalties. The informational framing of prediction markets, their acceptance in some foreign jurisdictions, or their use of cryptocurrency does not change this fundamental legal status.

The probability of enforcement against any individual user may be relatively low given the practical challenges of detecting offshore platform participation. However, the consequences of detection are significant, and the trend in Korean enforcement is toward enhanced capability rather than reduced scrutiny.

Alternatives and Legal Options

Those interested in prediction and forecasting have several legal alternatives:

• Play-money platforms: Prediction platforms using virtual currency or reputation points rather than real money fall outside gambling law
• Traditional financial markets: Legal trading through Korean securities and derivatives markets provides exposure to uncertain outcomes, though with different mechanics
• Academic research: Participating in university-run prediction research may receive regulatory accommodation when conducted under proper institutional oversight
• Forecasting communities: Non-monetary forecasting competitions and communities allow prediction practice without legal risk

For those experiencing gambling-related issues, including compulsive prediction market trading, resources are available through the Korea Center on Gambling Problems. Our responsible gambling resources and self-assessment tools can help evaluate whether gambling behaviors have become problematic.

Future Regulatory Outlook

Global Regulatory Trends

Internationally, prediction markets occupy an evolving regulatory space. The US approval of election contracts represents regulatory acceptance in the world's largest economy. European jurisdictions continue developing frameworks that may distinguish prediction markets from traditional gambling.

Academic and policy research from institutions like NBER continues documenting the informational value of prediction markets, potentially influencing future regulatory approaches. The integration of prediction mechanisms into corporate forecasting and government policy analysis may normalize these tools over time.

Korean Policy Considerations

Korean gambling law reform remains politically challenging, as explored in our future regulation analysis. Any movement toward prediction market legalization would require substantial shifts in regulatory philosophy and public attitudes toward gambling.

Several factors could influence future Korean policy:

• International precedent: Successful regulated prediction markets in major economies may influence Korean policy thinking
• Economic research: Demonstrated informational value in specific contexts could support narrow authorization for research purposes
• Financial integration: As prediction mechanisms integrate with traditional finance, regulatory distinctions may become harder to maintain
• Enforcement costs: If prohibition proves ineffective and costly, alternative regulatory approaches may gain support

However, any significant change would likely require years of policy development and legislative action. For the foreseeable future, Korean citizens should assume prediction markets will remain prohibited.

Frequently Asked Questions

Conclusion

Prediction markets represent an innovative approach to information aggregation that has gained significant traction globally, particularly through platforms like Polymarket during major events such as US elections. However, for Korean citizens, these platforms exist firmly within the prohibited gambling category regardless of their informational framing or technological sophistication.

The legal framework is unambiguous: wagering money on uncertain future outcomes constitutes gambling under Korean law. The use of cryptocurrency, offshore platforms, or blockchain technology does not change this fundamental classification. While enforcement faces practical challenges, the legal status and potential consequences are clear.

For those interested in forecasting and prediction, legal alternatives exist through play-money platforms, traditional financial markets, and academic research participation. Those concerned about gambling behaviors, whether related to prediction markets or other forms, should utilize the resources detailed in our responsible gambling guide.

As global regulatory approaches continue evolving, future Korean policy may eventually address prediction markets specifically. Until then, the prudent approach for Korean citizens is to understand that prediction market participation carries real legal risks that no technological or semantic distinction can eliminate.