U.S. prediction мmarket boom meets UK Exchange decline
The UK Gambling Commission’s 2025/26 Annual Report has revealed a sharp decline in British betting exchange activity, a trend that stands in stark contrast to the explosive growth of prediction markets across the Atlantic — raising fresh questions about whether the two financially-inspired products are on diverging paths, or simply at different stages of the same one.
A shrinking share of the UK market
Betting exchanges now account for just 3.79% of Gross Gambling Yield (GGY) in the UK, generating £92.66 million between April 2025 and March 2026. That figure has almost halved since 2016/17, when exchange GGY stood at £171.53 million, despite the continued presence of established players like Betfair Exchange and Spreadex, and recent platform revamps at operators including Matchbook and Smarkets.
The decline has actually outpaced the drop in high street land-based betting shop revenue over the same period — exchange GGY has contracted by 46%, compared with a 26.8% fall in retail betting — even though the retail decline tends to draw far more media attention. Meanwhile, general remote sportsbook GGY climbed from £1.75 billion to around £2.5 billion over the same stretch, underlining that the exchange slump is not simply part of a broader online betting downturn.
Apples and oranges, or something closer?
The UK exchange decline comes as prediction markets experience exponential growth in the U.S, and are also gaining international traction elsewhere. The British Overseas Territory of Gibraltar, for instance, has set up the first standalone regulatory framework specifically for prediction market products.
The Gambling Commission’s figures raise a genuine question: does the exchange decline suggest British bettors simply have little appetite for financially-inspired betting products, and by extension, prediction markets? Or are existing exchange users being drawn toward predictions instead? Another plausible explanation is that exchanges are losing customers to traditional sportsbooks, which have kept improving their own offerings through bet builders and multi-sport accumulators.
The resemblance between exchanges and predictions is not lost on industry figures, given their shared financially-driven structure, though there are real differences. Exchanges let users bet against each other, with the operator taking a commission, while prediction markets function as financial derivatives platforms, trading event contracts priced between $0 and $1.
“They’re called betting exchanges in the UK. They’ve existed for 20-plus years in the UK in a very legal, stable framework here,” Jason Trost, chief executive of Smarkets, told SBC News in an interview earlier this year. He compared exchanges and predictions to soccer and football: “they’re not apples and oranges, they’re both apples.“
Smarkets has since revamped its own platform to resemble a U.S.-style predictions offering. Matchbook, another long-established UK exchange, became the first British firm to enter prediction markets in December, signing a white-label deal with FIFA World Cup prediction markets partner ADI Predictstreet ahead of the tournament. UK prediction market-style products remain more restricted than their US counterparts, notably lacking the politics- and war-based contracts seen on platforms like Polymarket. For now, predictions in the UK look more like a bolt-on to the existing exchange model than a standalone category.
The contrast in fortunes is stark: Polymarket and Kalshi are both eyeing valuations in the billions, while Gambling Commission data confirms a continued decline for what was once one of the more fruitful corners of UK betting. Whether prediction markets can ultimately succeed in the UK remains speculative, and some regulatory clarity will likely be needed first.
Could predictions launch in the UK?
The UK currently blocks retail access to prediction markets under its ban on unlicensed binary-option style products, though that likely does little to stop determined users from accessing platforms via a VPN, beyond what’s already available through licensed exchanges.
That could change. The Financial Conduct Authority (FCA) has reportedly held exploratory talks about potentially relaxing those restrictions. Meanwhile, listed UK firm IG Group recently acquired Underdog, a U.S. daily fantasy sports platform that has signaled predictions could become its primary offering, while FTSE 250 constituent Plus500 launched its own US-facing prediction markets product earlier this year through a partnership with Kalshi.
Those moves suggest key industry stakeholders see real potential for prediction markets to gain a foothold in the UK, even against the backdrop of the exchange sector’s decline — and even with the biggest opportunities still concentrated in the U.S. Whether a UK predictions launch would ultimately help or hurt exchanges, and how, remains an open question. For now, though, one of British betting’s veteran products continues its decline, even as a strikingly similar product is hailed as revolutionary on the other side of the Atlantic.
