Labour plans prediction markets regulation to prevent abuse and insider trading

Labour wants Malta to become one of the first countries to regulate prediction markets, with Economy Minister Silvio Schembri arguing on Monday that the move would protect users from abuse and potential insider trading.

Prediction markets allow people to place bets on real-world outcomes, from sporting events to elections, with odds shifting as bets are placed. However, they have led to fears over insider trading and abusive practices in some instances.

Earlier this year, the New York Times found that bets about a US and Israeli strike on Iran surged a day before the attack took place.

Last month, a US Army special forces soldier was charged with using classified information to place bets on the strike before it happened.

Prediction market operators, including Polymarket and Kalshi, operate in a legal grey area. Some EU countries have banned them outright, while others have restricted their service.

Earlier this month, Polymarket opened betting on Malta’s general election, despite betting on elections being illegal in Malta.

On Monday, Schembri rejected the argument that introducing prediction markets to Malta would lead to similar cases of abuse.

“The same argument was made when we introduced other sectors, such as financial services and crypto,” he said.

Schembri said that after Malta had regulated the crypto sector, others had followed suit, pointing to the EU’s Markets in Crypto-Assets Regulation (MiCA) which is “largely based on Malta’s laws”.

“Today, there is no regulation over prediction markets. I am convinced that once we go in that direction, others will follow,” he said.

Schembri said that while Maltese citizens can currently place bets on prediction market providers such as Polymarket and Kalshi, they do not enjoy the protection that a regulated sector provides.

“What is best, a regulated sector with clear rules, or an open market where everybody does what they want?” he asked.

The press conference was also addressed by Ian Borg and Clint Azzopardi Flores. Photo: Matthew Mirabelli

Schembri was speaking during a news conference in which he, together with PL deputy leader Ian Borg and candidate Clint Azzopardi Flores, outlined the party’s push for digitalisation.

They pointed to a report published last month by Politico ranking EU member states’ ability to translate digital policy into real-world outcomes, in which Malta had placed fourth, behind Denmark, Sween and Finland.

Labour was pledging to further improve Malta’s digital economy by incentivising digitalisation and digital skills through various measures, they said.

These include a 60% tax credit for digitalisation initiatives by companies, and a €100 million per year investment in sectors like AI, cybersecurity and robotics.

They also pointed to a €7 million agreement, signed on Saturday, to give all residents access to ChatGPT Plus and Microsoft Copilot after completing a course on how to use artificial intelligence.