The hard question is not whether Meta can build a prediction markets product. But rather how it licenses one across four or five jurisdictions with conflicting legal frameworks and no settled consensus on whether prediction markets are gambling, financial derivatives, or something else entirely.
Meta is reportedly building a standalone prediction markets app. Internally called “Arena,” the platform would let users bet on outcomes across sports, politics, and current events, initially through a points-based system, with real-money wagering potentially on the table later.
If it ships, it would compete directly with Polymarket and Kalshi, which together processed over $130 billion in trades through the first half of 2026.
Zuckerberg has been here before. Meta launched Forecast in 2020, a crowdsourced predictions app, and shut it down in 2022. The market was nascent then. It is not nascent anymore.
The regulatory picture is a different level of complexity than it was six years ago, and that complexity is precisely what makes Arena interesting from a licensing standpoint.
This article walks through how Meta’s Arena hypothetical prediction market licensing architecture would likely take shape, jurisdiction by jurisdiction.
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Before any regulator touches an application, the foundational question has to be answered: what is a prediction market?
The answer changes depending on who you ask.
In the United States, the CFTC has taken the position that event contracts traded on a designated contract market (DCM) are financial derivatives, regulated under the Commodity Exchange Act.
Kalshi holds a CFTC DCM license.
Polymarket operates offshore via a Curaçao-registered entity and blocked U.S. users after a 2022 CFTC settlement. The CFTC’s oversight of this space is currently expanding just as the agency’s staff has reportedly shrunk to its smallest headcount in years.
In the UK, the Gambling Commission has historically treated fixed-odds event betting as gambling. Whether a points-based prediction platform triggers a remote operating license depends on whether a “prize” is involved and whether the activity constitutes “gaming” or “betting” under the Gambling Act 2005.
Neither question is neatly resolved by the existence of a leaderboard.
In the EU, the answer fractures further across member states because gambling regulation is not harmonized under EU law. MiCA does not reach prediction markets.
Financial instruments under MiFID II might apply if contracts are structured as derivatives and offered to the public for investment purposes. Whether Arena’s products cross that threshold is a facts-and-circumstances analysis, not a bright-line rule.
Australia sits somewhere in between, with ASIC holding jurisdiction over financial products and state-level gambling regulators holding jurisdiction over wagering. The same product can attract both sets of regulators simultaneously.
This classification ambiguity is not a detail. It is the entire licensing architecture problem.
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If Meta wants to offer real-money prediction contracts in the U.S., the regulatory path runs through the CFTC, specifically a Designated Contract Market (DCM) license or a Derivatives Clearing Organization (DCO) registration depending on how settlement is structured.
A DCM license allows a platform to list event contracts for trading by the public. Kalshi obtained one. The process involves demonstrating that contracts are not contrary to the public interest (a legal standard under CEA Section 5c(c)(5)(C)), building out surveillance and compliance programs, and meeting capital requirements.
It is a multi-year process with no shortcut. Meta’s legal team would spend considerable time arguing that Arena’s contracts are not excluded commodities under the CEA and that the platform’s design does not constitute off-exchange retail commodity transactions.
The applicable license is a CFTC Designated Contract Market (DCM). Contracts are classified as financial derivatives and event contracts under the Commodity Exchange Act, with the CFTC as the supervising regulator. Realistically, the timeline runs two to four years given current congressional attention on the sector.
The points-only version of Arena sidesteps this entirely, at least initially.
A no-prize, no-cash, video-game-style points system is unlikely to meet the definition of a commodity contract. The moment Meta introduces real money or redemption value, the CFTC analysis reopens.
The UK’s Gambling Act 2005 defines “betting” to include making or accepting a bet on the outcome of a race, competition, or other event (including virtual events).
A prediction market where users stake something of value to predict outcomes sits close to that definition, depending on whether participation constitutes a “bet” and whether the reward qualifies as a “prize.”
If the UK version of Meta’s Arena stays virtual points-only with no real-world redemption, it likely falls outside the Gambling Commission’s remit. The moment it introduces financial reward, or a token with fiat value, a remote operating license becomes the relevant authorization, specifically a betting license or gaming license depending on the contract structure.
The Financial Conduct Authority enters the picture if any contract is characterized as a financial instrument under the Financial Services and Markets Act 2000 or its successor frameworks.
Contracts for differences and spread bets are already FCA-regulated. A prediction market contract structured with leverage, margin, or reference to an underlying index would likely be assessed as a financial instrument, requiring FCA authorization as an investment firm, a process that has lengthened considerably since the UK’s post-Brexit regulatory reforms.
On the gambling path, the relevant authorization is a Remote Betting Intermediary license from the Gambling Commission.
On the financial path, it is FCA Investment Firm Authorization under FSMA. The regulatory classification is contingent on product design: gambling if outcome-based wagering, financial instrument if derivative-structured. Most operators in this space try to avoid holding both, so the product design choice, specifically how value accrues and how contracts are structured, determines which track applies.
The EU creates a two-track problem.
If Arena contracts are framed as transferable securities or derivatives under MiFID II Annex I Section C, the platform needs authorization as an investment firm from a national competent authority. ESMA coordinates, but licenses are issued at member-state level.
The MiFID II passport then enables cross-border passporting across the EEA, which is Arena’s most commercially attractive scenario if the financial-instrument framing holds.
What does “structured as a derivative” mean here?
If a contract references an underlying asset (an election result, an economic index, a sporting outcome treated as a reference variable), a national regulator may characterize it as a financial contract for differences under MiFID II. Whether regulators do that in practice depends partly on the product mechanics and partly on how aggressively each member state’s NCA interprets its mandate.
Germany’s BaFin has historically taken a broader view of what constitutes a financial instrument than, say, Ireland’s Central Bank.
For the gambling track, there is no EU-wide gambling license. Each member state runs its own regime.
Malta’s MGA license is the most commonly sought EU gambling authorization for pan-European operations because Malta has invested in regulatory infrastructure specifically to attract licensed operators. An MGA Remote Gaming License covers B2C gaming operations and, in some configurations, betting operations directed at EU users.
It does not create a legal right to operate in every member state (France, Germany, Italy, and Sweden each require local licenses on top) like MiCA in crypto does but it provides a credible base and keeps operators out of the unlicensed category.
On the financial path, the applicable authorization is a MiFID II Investment Firm license, most likely obtained via an NCA in a passportable jurisdiction. Ireland’s Central Bank, Luxembourg’s CSSF, and Lithuania’s Bank of Lithuania are the current preferred entry points for U.S. tech companies entering EU financial markets.
On the gambling path, the starting point is a Malta Gaming Authority Remote Gaming license, supplemented by local licenses in key member states.
The classification question is the same as elsewhere: financial instrument if derivative-structured, wagering if the product is framed as outcome-based betting.
The structural decision Meta makes in the U.S., CFTC event contract versus entertainment product, will likely determine which EU track it pursues. A CFTC-regulated product carries reputational and structural weight that makes the MiFID II path more defensible.
A points-only product with no financial character maps more naturally to a gambling license.
Related: When Does an In-Game Virtual Money Trigger a License?
Australia’s regulatory setup is the most complicated of the four because a single prediction market product can simultaneously trigger ASIC oversight and state/territory gambling authority oversight, with no clean mechanism to get a single ruling that resolves both.
ASIC regulates financial products under the Corporations Act 2001. A “financial product” includes a facility through which a person makes a financial investment, manages a financial risk, or makes non-cash payments.
An event contract where a user risks money on an outcome to receive a return is plausibly a financial product, specifically a derivative or a managed investment scheme depending on how the pooling and payout mechanics work. An Australian Financial Services license (AFSL) is required to deal in or advise on financial products.
At the same time, each state and territory runs its own wagering and betting legislation. The Interactive Gambling Act 2001 (federal) restricts certain online gambling services to Australian residents.
A Northern Territory racing license, administered through the NT Racing Commission, has historically been the preferred authorization for online bookmakers and wagering operators targeting Australian users.
NT’s framework is the most permissive of any state, and its license is recognized in practice across state lines.
Most serious operators hold both: an AFSL for financial product components and an NT racing/wagering license for the betting components. Structuring Arena for the Australian market means a careful delineation of which contracts are offered under which authorization.
This dual-track requirement is the reason most offshore prediction market operators simply geo-block Australian users rather than build the compliance architecture to serve them lawfully.
The applicable licenses are an AFSL from ASIC (federal) and a Northern Territory Wagering and Betting license from the NT Racing Commission. Derivative-structured contracts are classified as financial products under the Corporations Act; outcome-betting contracts are classified as wagering.
The NT Racing Commission and ASIC hold concurrent jurisdiction.
Across these four markets, the recurring finding is the same: product design determines the regulatory path. Regulators do not care what a platform calls itself.
A pure points-based system with no redemption value sits outside most of these frameworks, until secondary markets emerge or tokens accrue exchange value.
UK and Australian regulators have both demonstrated a willingness to look through formal structure to economic substance. If users are functionally wagering, the platform is functionally a wagering operator, regardless of what the terms of service say.
If Meta is serious about real-money prediction contracts (which the NYT reporting does not rule out), it is looking at four distinct licensing architectures with genuine regulatory relationships in each jurisdiction.
That architecture has to be built before launch, not retrofitted afterward. The product team and the compliance team need to be working from the same document.
The window for a clean dual-purpose structure, financial derivatives in some markets and licensed wagering in others, is open now. It will get narrower as congressional scrutiny of the sector increases and as regulators in the UK and EU move to close the definitional gaps that current-generation prediction market operators have been living inside.
Contact LegalBison to consult your prediction market platform licensing and jurisdictional advice.
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Source:
https://www.nytimes.com/2026/06/23/technology/meta-prediction-markets-app.html
