SEC Eyes Rules for Prediction Markets Tied to Individual Stocks

Polymarket International has seen significant growth in its equity-linked markets since launching individual-stock markets last October, with over $220 million in trading volume across roughly 31,000 contracts tied to U.S. companies.

Nearly 60% of this activity was related to movements in individual stocks, with Nvidia, Alphabet, Apple, and Tesla among the most actively traded names.

The contracts generally ask traders to take a 'yes' or 'no' position on whether a stock will reach a specified price by a given date. However, the rapid growth of these markets has raised regulatory questions, particularly around whether some contracts resemble securities derivatives.

Under U.S. law, derivatives based on a single security can fall within the definition of a security-based swap, placing them under Securities and Exchange Commission oversight and subjecting them to rules that differ sharply from ordinary retail prediction markets.