“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.
India has taken a similarly firm stance.
According to reporting by ThePrint, India’s Ministry of Electronics and Information Technology has already issued a blocking order against Polymarket and has been preparing similar action against Kalshi after both platforms continued accepting Indian users despite regulatory restrictions. Indian authorities view prediction markets as incompatible with the country’s online gaming framework, which prohibits real-money online gaming activities.
The same debate is increasingly surfacing in the United States.
In Nevada, the pressure has already reached the courts. In April, Carson City District Court Judge Jason Woodbury granted a preliminary injunction against Kalshi, ordering the company to put geofencing and geolocation measures in place to stop Nevada residents from accessing activities that could violate the state’s gaming laws. The court gave Kalshi until May to roll out those controls and asked the company to explain any delays if it needed more time.
Woodbury also made it clear that, in his view, the sports-related contracts offered on the platform were effectively no different from traditional sports betting under Nevada law.
Taken together, regulators are increasingly asking whether these platforms can actually keep restricted users out.
Why geolocation on prediction markets is harder than it sounds
That may sound straightforward, but experts say it’s anything but.
“What regulators want now is evidence of layered and reasonable controls instead of a perfect solution,” said Julian Gage, a data privacy expert who previously worked on identity verification and geographic access restrictions at Coinbase and Robinhood.
“To prove someone is where they claim to be, you end up collecting liveness scans, device fingerprints and precise location, which can be argued to be against GDPR and other US/global privacy requirements. This means compliance teams will have to balance collecting more data to satisfy access rules and less to satisfy privacy law.” – Julian Gage, data privacy expert
Polymarket says it uses a combination of geolocation, identity verification and other compliance measures to enforce geographic restrictions, including blocking some VPN-associated IP addresses and requiring additional verification from certain users.
The platform is restricted in 33 countries and several other jurisdictions due to regulatory requirements and international sanctions. Although users may attempt to evade those restrictions through VPNs and other tools, no reliable public estimates exist for how many successfully circumvent geographic controls, and platforms generally do not disclose geolocation enforcement metrics.
That’s why 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. That can include GPS data, device information, browser settings, language preferences, payment details and identity verification records.
The idea is if all of those signals point to the same location, platforms can be more confident that a user is where they claim to be. If the signals don’t match up, it can be a sign that additional checks are needed.
“If someone’s IP says they’re in New Jersey but their device timezone is set to Manila and their language settings are Filipino, that’s a meaningful contradiction,” Husnain Bajwa, vice president of product for risk solutions at SEON, told ReadWrite. “No single signal is definitive on its own and the value comes from checking whether all of them tell the same story.”
According to Dr. David Utzke, CEO and CTO of MyKey Technologies, many operators are now moving beyond traditional geolocation methods altogether. Rather than relying primarily on IP addresses, platforms increasingly use GPS data, Wi-Fi triangulation, cellular network information, device integrity checks and identity verification systems to verify a user’s location.
For regulators, geolocation alone is no longer enough. The focus is increasingly shifting toward proving that a user’s physical location matches their verified identity.
“The ultimate gatekeeper,” Utzke said, is linking location controls directly to a user’s legally verified identity. In some cases, platforms are no longer checking location only when a user signs up. Instead, location may be assessed continuously, including when a trade is placed or a transaction is executed.
The ongoing cat-and-mouse game
Even sophisticated systems face significant limitations.
VPN detection tools have become much better at identifying traffic from major commercial providers. But residential proxy networks remain far harder to detect because they route traffic through legitimate household internet connections. To a platform, those users can look almost identical to ordinary customers.
“A journalist using a VPN for security looks identical to a gambler trying to access a restricted market,” Bajwa said, creating a challenge for both operators and regulators.
Linda Goldstein, partner at CM Law, said regulators generally view geoblocking and website restrictions as useful enforcement tools, despite their limitations.
“Users in restricted jurisdictions have reported that they can still access international prediction markets through inexpensive VPN services,” Goldstein noted, adding that platforms have responded by strengthening identity verification and monitoring systems.
Commercial VPNs, residential proxy networks, smart DNS services and hardware-spoofing tools continue to create new ways for users to disguise their true location. As platforms improve detection methods, new workarounds quickly emerge.
Geoblocking isn’t just a compliance issue
The impact of regional restrictions extends beyond regulatory headaches. Prediction markets depend on participation. The more people trading, the more liquid and potentially accurate those markets become.
That’s why geoblocking is said to have become more than a technical compliance challenge. It also has implications for the future growth of the industry.
Ryan Kirkley, co-founder and CEO of Global Settlement Network, said restrictions can limit both participation and the diversity of opinions reflected in market prices.
“They’re a bigger issue than many people realize because these markets depend heavily on participation,” Kirkley said. “If large parts of the world can’t access them, you end up with a smaller and potentially less representative pool of opinions driving prices.”
At the same time, he argues that long-term growth will ultimately depend on regulatory clarity rather than simply expanding access.
“If an industry can only scale by operating ahead of regulation, that’s usually a sign that regulators haven’t been convinced of its value yet,” he said. “Long-term sustainable growth will come from clearer rules rather than simply expanding access.”
Not everyone is convinced geolocation blocking on prediction markets work
While most experts describe geolocation compliance as a complex technological challenge, 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. If they genuinely wanted to keep restricted users out, the technology exists to do it. They don’t do it because the leakage benefits them.” – Adam Bjorn, Plannatech CEO
Adam Bjorn, CEO of Plannatech and operator of Prime Sportsbook, believes many restrictions are easier to bypass than regulators would like to admit.
“Not much,” Bjorn said when asked about the impact of geoblocking on the industry’s future growth. “The geo-blocks are easy to circumvent because the exchanges want them to be. If they genuinely wanted to keep restricted users out, the technology exists to do it.”
Bjorn argued that enforcement often falls short because meaningful restrictions would require tighter controls around payments, identity verification and account custody.
“Until someone forces real enforcement at the platform level — payment rails, KYC, custodial controls — geoblocking is theater more than barrier,” he said.
There is one point of general agreement between the experts: keeping restricted users off online platforms is often much harder in practice than it sounds on paper.
Gambling, finance or something in between?
At the same time, regulators remain divided on a more fundamental question: what exactly are prediction markets?
Some jurisdictions classify them as gambling because participants risk money on uncertain outcomes. Others, particularly in parts of the United States, increasingly view them as regulated financial products.
Stephen Piepgrass, partner leader of regulatory investigations, strategy and enforcement at Troutman Pepper Locke, stated that federally regulated platforms such as Kalshi must comply with know-your-customer and anti-money laundering requirements that do not apply to many offshore prediction markets.
The disagreement over classification is one reason regulators are approaching the industry so differently around the world. While some authorities focus on gambling laws, others are examining prediction markets through the lens of financial regulation, derivatives trading and consumer protection.
The future of compliance
Industry observers expect compliance requirements to become even more demanding in the years ahead.
Regulators increasingly want continuous verification rather than a one-time location check during registration. In other words, platforms may need to prove not only where users are when they sign up, but where they are throughout the life of an account.
Utzke believes that trend will accelerate. He draws attention to tools such as behavioral monitoring, searchable IP audit trails, multi-source geolocation systems and continuous identity verification as examples of the safeguards regulators increasingly expect platforms to have in place.
But stronger verification comes with its own trade-offs. The more location and identity data a platform collects, the easier it may be to demonstrate compliance. At the same time, gathering and storing that information creates additional responsibilities around data security, privacy and user protection.
Prediction markets have attracted growing attention because of their potential as forecasting tools. Yet as the industry spreads, regulators are increasingly treating these platforms less like novel technology products and more like businesses operating in highly regulated environments, with the compliance expectations that come with them.
As Kirkley put it, “Long-term sustainable growth will come from clearer rules rather than simply expanding access.”
Even then, experts agree that no amount of technology will create perfect enforcement.
Horwitz adds: “The more practical objective is to implement a layered, risk-based control environment that makes circumvention difficult, increases the likelihood of detection, and provides defensible evidence that reasonable measures were taken to comply with applicable regulatory requirements.”
However, Bajwa reminds us that “regulators understand that determined actors will find a way in. What they don’t accept is operators who check a box at registration and call it done.”
ReadWrite has reached out to Polymarket and Kalshi for comment.
Featured image: Canva
The post Prediction markets face a geolocation reckoning as regulators tighten scrutiny worldwide appeared first on ReadWrite.
This articles is written by : Nermeen Nabil Khear Abdelmalak
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