“The first thing to understand is that geolocation controls are risk management controls, not absolute security controls.”

Trevor Horwitz, founder and CISO of TrustNet, neatly sums up the challenge currently facing prediction market platforms such as Polymarket and Kalshi.

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.

Supporters argue they’re valuable tools that let people put their money behind predictions about everything from elections and economic data to sporting events and global affairs. Critics see things differently, saying the concept is essentially gambling packaged up in a more sophisticated form.

Until recently, that debate was mostly academic. Now, regulators and courts around the world are being forced to weigh in.

“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.” – Trevor Horwitz, TrustNet CISO and founder

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, alleging that both platforms were operating without the necessary administrative authorization. At the same time, Spain’s gambling regulator, the Directorate General for the Regulation of Gambling (DGOJ), ordered internet service providers to block access to the platforms while the investigation is ongoing.

Spanish authorities argue that prediction markets amount to gambling because users stake money on uncertain future outcomes. Regulators have also raised concerns that unlicensed operators may not provide the identity verification systems, age checks, self-exclusion tools and consumer protections required under Spanish gambling laws.