Online prediction market Polymarket has taken $77,507 worth of bets on whether major banks, including HSBC and Lloyds, will fail by the end of this year. A UK lawmaker and European regulators have voiced concerns over insider trading and market manipulation tied to the platform, while Polymarket says it is simply making public information more accessible.
Polymarket has allowed users to place $77,507 (£58,530) worth of bets on whether the world's biggest banks will collapse by the end of this year, including HSBC and Lloyds Banking Group alongside JP Morgan and BNP Paribas. UK authorities are now being urged to intervene.
Residents of the UK, US, Canada and the EU are banned from betting on Polymarket's offshore platform. However, punters across roughly 150 countries can still take positions on events that would trigger severe financial instability.
Lawmaker calls for regulatory action
Treasury committee member and Liberal Democrat MP Bobby Dean said UK regulators should step in, warning that bank-related betting could feed real shifts in market sentiment. He said that if activity on the platform grows and a market escalates rapidly, it could even trigger bank runs, and urged UK regulators to contact their US counterparts.
The warning follows the banking industry already having been told to prepare for the risk of social media-fuelled bank runs, after Silicon Valley Bank and Credit Suisse collapsed in 2023 following stock sell-offs and bank runs accelerated by speculation on platforms such as X and WhatsApp.
Polymarket defends the bets
Polymarket's chief legal officer, Neal Kumar, said the information in these markets is already public and that banks, hedge funds and credit professionals have long had access to credit default swap markets. He argued the platform simplifies the question and gives a larger audience access to information on bank failures, rather than restricting it to institutions.
Regulators flag manipulation risks
The UK's Financial Conduct Authority told the Guardian it has been speaking with international regulators about prediction markets to protect market integrity. The European Securities and Markets Authority used its risk report last month to warn that "a growing number of incidents illustrates that prediction markets are rife with inside trading", pointing to new crypto wallets that reportedly generated $1.2m in profits shortly before the US-Israel strike on Iran became public in February.
ESMA also flagged a US soldier criminally charged for allegedly placing profitable bets ahead of the US capture of Venezuela's Nicolás Maduro. Separately, French police were notified over suspected tampering of weather sensors used to settle Polymarket weather contracts.
The Bank of England said its supervisors engage regularly with firms on emerging market risks, while Lloyds and HSBC declined to comment and the Treasury did not respond to requests for comment.
Source: The Guardian
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