Why This Prediction Market Needed Classification Before Licensing

The full story

How the matter unfolded

We worked with a founder building a prediction-market platform.

His first question was completely understandable: “What licence do I need?”

But that was not the first question the project needed to answer. Before discussing licensing, we needed to understand what the founder had actually built.

The licence was not the first question

Licensing comes after classification.

A licence authorises a particular type of regulated activity. If the legal character of the product is still unclear, searching for a licence can send the project towards the wrong regulator, jurisdiction or operating model.

The prediction-market platform did not arrive with a clear regulatory label. Its classification depended on how users participated, what they paid, how outcomes were determined and what rights or returns the platform created.

The product needed to be understood before its licensing options could be assessed.

Characterisation changed everything

We analysed the product from several regulatory perspectives.

Could the platform be characterised as gambling? Did it create a financial product? Could the positions be treated as derivatives? Did the model resemble an event contract? Were there other regulated activities connected to operating the market or handling payments?

Each possible characterisation led to a different set of rules, regulators and licensing requirements.

This meant product design and legal analysis could not be separated. A change to the user journey, settlement process or economic model could affect the regulatory position.

Comparing the jurisdictions

The same prediction-market product could be treated differently across jurisdictions.

We examined multiple regulatory frameworks and mapped how each could apply to the proposed platform. We also considered how the jurisdiction would affect the payment rails, technology requirements, operating entities and route to market.

The goal was not simply to identify the jurisdiction with the lightest rules. It was to understand which pathway genuinely fitted the product and could support the founder’s commercial strategy.

Building an executable roadmap

Once the product and possible classifications were understood, we mapped the available licensing options.

The strategy was phased so the founder could make decisions in the right order. The product analysis informed the jurisdiction comparison. The jurisdiction comparison shaped the licensing options. The regulatory pathway then informed the payment and technology requirements.

The legal opinion became a roadmap for developing the project, not a document separated from the business.

The takeaway

Do not begin an innovative product by asking which licence it needs.

Start by understanding how the product works, what rights it creates, how value moves and how different regulators may characterise it.

Great legal strategies do not begin with a licence. They begin with the product.

Once the product is properly understood, the jurisdiction, regulatory pathway and licensing strategy become much clearer.

The result described here relates to this matter. Another project's facts, rules and outcome may differ.