Polymarket bank-failure bets on HSBC and Lloyds prompt UK calls to act

UK authorities are facing calls to intervene after it emerged that the prediction market Polymarket has taken bets worth tens of thousands of dollars on whether HSBC and Lloyds will fail, according to the Guardian.

The US-owned platform allowed users to take $77,507 (£58,530) worth of positions on whether the two banks would collapse by the end of this year, the Guardian reported.

Polymarket operates as a prediction market rather than a conventional bookmaker, taking wagers on outcomes ranging from football results to the existence of aliens and whether a bomb will be dropped on a particular city, according to the Guardian.

The disclosure comes amid what the Guardian describes as mounting concern over the effect such markets can have on the integrity of the financial system.

Prediction markets allow users to buy and sell contracts tied to the probability of a given event, with prices shifting according to demand much like a trading market rather than a fixed-odds bet.

Critics argue that allowing the public to stake money on the solvency of major lenders risks feeding speculation that could itself unsettle confidence in those institutions, a dynamic regulators have long tried to guard against in banking.

The Guardian's report does not set out what action UK authorities might take, but notes that the revelation has intensified pressure for a response given the scale of attention Polymarket has drawn across different markets.

HSBC and Lloyds are among the UK's largest banking groups, and both are regulated by the Prudential Regulation Authority and the Financial Conduct Authority, which oversee the stability and conduct of deposit-taking institutions.

The episode highlights the widening reach of prediction markets beyond their origins in political and sporting outcomes, and the difficulty regulators face in policing platforms based overseas that take wagers on events with direct bearing on domestic financial stability.

Verte News will continue to follow developments as UK regulators respond to the Guardian's reporting on Polymarket's listings concerning HSBC and Lloyds.