UMVA has learned that a growing challenge facing prediction market platforms, such as Polymarket and Kalshi, is the increasing scrutiny from regulators worldwide, particularly regarding geolocation controls.
Trevor Horwitz, founder and CISO of TrustNet, neatly sums up the challenge: “The first thing to understand is that geolocation controls are risk management controls, not absolute security controls.”
Supporters argue that prediction markets are valuable tools that let people put their money behind predictions about everything from elections and economic data to sporting events and global affairs. Critics, however, see them as essentially gambling packaged up in a more sophisticated form.
Regulators around the world have been stepping up scrutiny of event-based trading platforms, as prediction market operators have been put under the spotlight to see whether they’re doing enough to stop people from circumventing geographic restrictions.
Recent actions in Spain and India show that pressure on the industry is building fast, and the question of what prediction markets really are is becoming harder to avoid. In Spain, the Ministry of Social Rights, Consumer Affairs and Agenda 2030 opened sanction proceedings against Polymarket and Kalshi.
The reality is that it is not realistic for any globally accessible online platform to guarantee that users from prohibited jurisdictions will never gain access, according to Horwitz.
Experts say that geolocation on prediction markets is harder than it sounds. “What regulators want now is evidence of layered and reasonable controls instead of a perfect solution,” said Julian Gage, a data privacy expert.
Polymarket says it uses a combination of geolocation, identity verification, and other compliance measures to enforce geographic restrictions. The platform is restricted in 33 countries and several other jurisdictions due to regulatory requirements and international sanctions.
Many platforms no longer rely on simple IP address checks alone. Instead, they use a mix of different data points to get a more reliable picture of where a user is actually located, including GPS data, device information, browser settings, language preferences, payment details, and identity verification records.
The ongoing cat-and-mouse game between platforms and regulators continues, with commercial VPNs, residential proxy networks, smart DNS services, and hardware-spoofing tools creating new ways for users to disguise their true location.
Geoblocking is not just a compliance issue; it also has implications for the future growth of the industry. Prediction markets depend on participation, and the more people trading, the more liquid and potentially accurate those markets become.
Some industry figures argue that the problem is less about technology and more about incentives. “The geo-blocks are easy to circumvent because the exchanges want them to be,” said Adam Bjorn, Plannatech CEO.
Regulators remain divided on a more fundamental question: what exactly are prediction markets? Some jurisdictions classify them as gambling, while others view them as regulated financial products.
Industry observers expect compliance requirements to become even more demanding in the years ahead, with regulators increasingly wanting continuous verification rather than a one-time location check during registration.
The future of compliance will likely involve more sophisticated tools, such as behavioral monitoring, searchable IP audit trails, multi-source geolocation systems, and continuous identity verification.
Ultimately, experts agree that no amount of technology will create perfect enforcement. The more practical objective is to implement a layered, risk-based control environment that makes circumvention difficult.
