Foreign prediction markets illegal - says gambling association

This comes as users on the American-based Polymarket have already spent more than R1.2 million on who will win the Johannesburg mayoral race in the local government elections later this year.

Coleman said prediction markets are not new and have existed in one form or another for years, but what is new is the increased accessibility to the betting platforms.

"What is relatively new is that South African consumers can now participate easily on offshore platforms with those operators being licensed or regulated," said Coleman.

He said while South Africans can access these platforms, there is no dedicated legislative framework in South Africa that expressly authorizes or regulates these products.

According to Coleman, these companies operate outside of the local licensing system, which means they are not subject to the same regulations.

"They are not subject to the same consumer protection, reasonable gambling, responsible gambling, taxation, even anti-money laundering and integrity requirements that other South African licensed gambling operators must comply with."

He said this 'regulation gap' is a major concern for SABA.

Coleman said he doubts that betting on the Joburg mayoral race would actually impact the outcome itself.

He said integrity is of great concern internationally, whether it be elections or a local sporting event.

Bets are even placed on the temperature at certain locations, he added.

"As an example, from an integrity point of view, the thermometer at Cape Town International Airport, where people are betting on the maximum temperature on a daily basis. What we've heard recently is that one of the days that the market was available, there was a tremendous spike in betting on higher temperatures than normal."

"Upon investigation, they found that somebody had interfered and placed a hairdryer in the room where the thermometer was reading the temperature and directly impacted on the temperature for that day."

He said this is a very simplified example of how these markets can suffer integrity questions.

Internationally, there are concerns over betting on 'negative' outcomes globally as this might impact the outcome itself.

"We can take an analogy from horse racing, where if [you were] betting on horse A to win the Durban July, yes or no, and you bet on no; then the jockey's involved in the manipulation of the riding of that horse to manipulate the outcome, that becomes an integrity question."

Coleman argues that there is currently no dedicated legislation in South Africa that 'expressly' authorises or regulates these products, but they still lure South African customers.

He said if the government makes a policy determination on these products, they will have to ensure that the markets are regulated properly.

"Because what's happened with Polymarket and Kalshi, there have been a number of markets that have been resolved based on somebody's interpretation, and it's not a given that the person that's interpreting whether something has or hasn't happened is definitive in determining that market."

He said an example is the US-Iran war, where there was a dispute lodged over whether a ceasefire was reached, with the US and Iran making opposite claims publicly.

"[In that case] the market needs to be determined who's won and who's lost. Because if you've bet yes, then you're looking for the outcome to be that the ceasefire has been achieved, and if you've bet no, you're looking for the disagreement with regards to the ceasefire."

He said this calls into question who is the final arbiter and whether the agreement is legitimate.

This has led to a direct loss of money because the interpretation of the outcome differs from the customer's interpretation or prediction.

"In a regulated market, you want a gambling board or a regulatory authority to be the main arbiter so that their decision is final on what that outcome will be because they're objective and they're trusted to regulate the market."

Coleman said that, under their interpretation of the law, because these companies are not registered in South Africa, it is illegal to place bets on these sites.

"Winnings on those markets could be the subject of confiscation by the National Gambling Board, who have the power in terms of the National Gambling Act, much like betting on overseas casino markets or websites."

He concluded by arguing that gambling on overseas unregulated markets 'does nothing' for the South African economy.

READ MORE