Ghosts of Prediction Markets Past: How the U.S. Can Avoid the U.K.’s Collapse and Learn from Asia’s Success
Hi, my name is Gary Morland, co-founder of BetBreakingNews. I’ve worked on all sides of the betting industry, across multiple continents, for over 20 years. I’ve seen promising markets thrive, and I’ve seen others collapse under the weight of shortsighted operators and heavy-handed regulators.
Sean asked me to write this piece because the U.S. prediction market is at a critical juncture. It could evolve into something vibrant and efficient, like the best models I’ve seen in Asia and Australia. Or it could spiral into dysfunction, repeating the mistakes that crippled the U.K.
The direction this industry takes will depend on two things: how operators treat sharp bettors and how regulators enforce their rules. If we get either of those wrong, the “bad ending” comes fast. But if we learn from history, the U.S. has a real chance to build the most innovative and trusted prediction market ecosystem in the world.
The Betfair Lesson: When Exchanges Flourished — and When They Fell
Let’s start with a little history. Prediction market people often talk like this is brand new, but the core mechanics have been tested before. The closest historical cousin is Betfair, the betting exchange that reshaped wagering in the U.K. in the early 2000s.
At its peak, Betfair was a revelation. For the first time, bettors could trade against each other instead of just betting into the house’s line. Prices were sharper, liquidity was deeper, and — this is key — sharp bettors were not just tolerated but integral to the system.
You had arbitrage traders backing outcomes with traditional sportsbooks and laying them on Betfair. Recreational punters benefited because the odds reflected real information, not just the house’s margin. And even sportsbooks gained, because they had a liquid venue where they could hedge risk. It was a proper ecosystem, with each type of participant adding something valuable.
But then came the “fixes.” Regulators and operators began treating sharp bettors like parasites rather than providers of liquidity. Betfair imposed “premium charges” on consistent winners — up to 60% of profits.
What followed was predictable: liquidity dried up, pricing became less efficient, and sharp bettors either left or were forced into elaborate reindeer games — running fleets of accounts under different names, playing signup bonuses, disguising their action. The trust was gone, the ecosystem collapsed.
This is the U.K. today: a betting market that once looked like the future, now reduced to a cautionary tale. Most U.K. books now act less like traders and more like marketing fronts for odds suppliers such as Kambi, Genius, or Radar. They don’t actually price markets—they just retail someone else’s lines and restrict anyone who consistently beats them. That hollows out the ecosystem: operators lose the ability (and incentive) to understand real prices, and liquidity becomes fragile. Worse, this setup is easy to game. A sharp can nudge a supplier’s line through one outlet, then exploit the shifted odds on another operator using the same feed. The result is a market that still looks alive but is really just a network of storefronts selling cloned prices—thin, manipulable, and allergic to sharp information. And if you squint, you can already see shadows of that same story forming in the U.S. prediction market space.
The Good Place: Asia’s Handicaps and Australia’s Minimum Bet Laws
The good news is that there are positive models too. The best markets I’ve seen are in Asia, particularly the handicap markets, and the best regulatory framework I’ve seen is in Australia.
In Asia, big players like Tony Bloom can put down massive wagers that move the line instantly. That’s not manipulation — it’s information. The market absorbs the bet, adjusts, and becomes more efficient. Smaller bettors can then find value on the other side. Liquidity is high, pricing is sharp, and nobody is banned for being good at the game.
Australia, meanwhile, has taken a different but equally smart approach around horse racing bets. Regulators there implemented minimum-bet laws requiring operators to take a reasonable wager from any customer — often enough to allow $2,000 in winnings. The result is that sharp players can always get on, and recreational players benefit from efficient lines.
Both systems recognize a simple truth: sharp money makes markets healthier. If you exclude or punish sharps, you don’t protect casual players — you hurt them by giving them weaker odds and thinner liquidity.
Why Things Go Right or Wrong
Having seen this play out across countries, the success or failure of a betting ecosystem almost always comes down to two levers.
First, how operators treat sharp bettors. It’s not enough to cater to whales who lose more than they win — those players get the red-carpet treatment everywhere. The real test is whether operators tolerate consistent winners who use superior models, better information, or sharper judgment. If they’re embraced, markets thrive. If they’re excluded, markets degrade.
Second, how regulators prioritize enforcement. Too often, governments hammer legal operators because they’re easy targets, while letting offshore platforms flourish unchecked. The irony is rich: regulators pile costs onto the companies they can reach, making them uncompetitive, while offshore books scoop up the best customers.
In the U.K., that overreach didn’t stop with the operators — it extended to the bettors themselves. “Responsible gaming” rules now require some players to hand over unredacted bank statements or get capped on how much they can wager based on where they live or what they earn. It’s a chilling vision of paternalism that drives serious bettors underground and punishes informed risk-taking.
When operators and regulators both get this wrong, you end up with the “bad U.K. future.”
The Bad Ending: The U.K. Model
The bad ending goes like this:
No visible sharp action. Efficient pricing disappears because consistent winners are barred.
Reindeer games. Sharps run multi-account operations, use friends and family as fronts, and treat legal books as disposable “outs” rather than partners.
Struggling operators. Without sharp-informed pricing, books lose more money to the few sharps that slip through, all while liquidity dries up.
Regulatory squeeze. Governments, instead of pulling back, tighten the screws on legal operators until they’re begging for subsidies. That’s right: the supposed tax-raising industry ends up needing bailouts, which has actually happened in the U.K.
Offshore dominance. The only real innovation and profitability comes from unlicensed offshore operators. And bettors — both sharp and recreational — figure that out quickly. With a VPN and some crypto, they’re gone.
Here’s another irony: crypto itself, with its transparent ledgers, could have made onshore betting more trustworthy. Instead, it becomes the backbone of offshore markets, while legal operators are stuck defending inefficient systems.
The U.S. Crossroads
If you’re following this story, you probably recognize pieces of that bad ending already looming in the U.S.
Look at the incumbents. FanDuel is already dipping into prediction markets, and DraftKings may follow. Both have long histories of squeezing or shutting down sharp bettors in their sportsbooks. Do we really think they’ll treat prediction markets differently?
Look at Kalshi. They’ve published a long list of categories of people barred from trading under CFTC restrictions — an entire class of sharp participants excluded. Polymarket, now operating in the U.S. under CFTC approval, will likely have to abide by the same. That means entire sources of high-quality information are locked out, making pricing worse, not better.
And don’t forget the regulators. State and tribal gaming commissions are already furious that the CFTC approved Kalshi’s sports markets. They’re moving to treat Kalshi and Polymarket like illegal offshore books because they bypassed the usual licensing path. This is the exact pattern we’ve seen before: legal operators take the regulatory hit while offshores sit back and thrive.
Meanwhile, the ecosystem is crowded. There are nearly 200 prediction markets listed on predictionindex.xyz, and that doesn’t even count novelty props at casinos or the many new entrants eyeing the space. Some will be offshore, some will operate in gray zones, and some will be startups looking for their wedge. If legal incumbents think bettors “have no choice,” they’re in for a rude awakening. Sharps want as many outs as possible. Recreational players can be fickle too — it doesn’t take much to push them toward competitors.
Still Time for the Good Ending
Despite all this, I don’t think the U.S. market is doomed. History is close to repeating itself, but there’s still a chance to steer toward the better models.
That means regulators need to stop punishing visible sharp action and start encouraging it. It means operators need to think in terms of long-term ecosystem health, not short-term exclusion of winners. It means learning from Asia’s handicap markets and Australia’s minimum-bet rules — not sleepwalking into the U.K.’s collapse.
If we get it right, prediction markets could become the most efficient, transparent, and trusted betting markets in the world. If we get it wrong, they’ll become little more than feeders for offshore books.
What are the odds that the U.S. actually learns from history? Heh. Maybe someone should open a prediction market on that.
If you’re interested in digging deeper into the history behind all this or exploring ways to help prevent the U.K.’s “bad future” from replaying in your jurisdiction, reach out to Gary Morland and the BetBreakingNews team at betbreakingnews@protonmail.com . We’re always up for a smart conversation about how to make betting markets sharper, fairer, and more resilient.
