Betting on the Future: Prediction Markets, Cryptocurrency, and South Korean Law

South Korea’s first criminal investigation of prediction market users has set the state’s instinct to police gambling against its ambition to lead in digital assets. The police are treating Korean Polymarket winners as illegal gamblers, even as the Lee Jae Myung administration courts the crypto industry that makes those payouts possible. How that contradiction is resolved will determine whether Polymarket and its competitors gain a foothold in the Indo-Pacific’s most digital-asset-fluent market.

There exists a tension between two bodies of South Korean law that developed on separate tracks and have not yet had to reckon with each other. One is the regulatory architecture Seoul has built to grow its digital asset industry, now among the largest in the world. The other is a decades-old prohibition on gambling that Korean authorities enforce against citizens even when they place bets abroad. Prediction markets are the first significant industry that sits inside both.

Korea has been an early and heavy adopter of cryptocurrency. The first cryptocurrency exchanges were established in 2013 and 2014, and interest in them has continued to grow, according to Chainalysis data. In 2025, the Korean won was the second-most-used currency for buying cryptocurrencies. This has also encouraged Seoul to regulate the market and protect consumers. In late July, the Blue House announced it would support the passage of the National Assets Basic Act. The legislation identifies digital assets as a national development objective, legalizes Bitcoin and Ethereum exchange-traded funds, and supports the development of a stablecoin backed by the won. It also assigns unique oversight and management over virtual assets and digital properties. It follows the introduction of the Digital Asset Basic Act, which would “establish a comprehensive legal foundation that treats digital assets as a distinct asset class worthy of its own regulatory apparatus.” There was also the 2024 Act on the Protection of Virtual Asset Users, which requires virtual asset providers to offer insurance to consumers for lost assets and penalizes market manipulation and other “unfair trading practices.” This regulatory and technology framework is designed to elevate Korea as a major player in the crypto space.

But its posture on gambling runs in the opposite direction. Barring limited exceptions, gambling is illegal for Korean citizens under the Criminal Act, punishable by fines of up to KRW 20 million or up to three years in prison. The prohibition applies to Koreans abroad; earlier this year, a district court sentenced a former Buddhist monk to ten months in prison after he was caught playing slots and baccarat overseas in Macau. 

Prediction market companies like Polymarket, which lets users wager cryptocurrency on the outcomes of elections and other news events, say they are not gambling but rather providing an alternative way to aggregate knowledge in society. “People don’t lie when money’s involved,” said Tarek Mansour, founder of Polymarket competitor Kalshi, in a 2024 interview. “You want to be right about your predictions so you don’t lose money.” Supporters of prediction markets in Korea may emphasize this aspect to defend their legality. 

Although the Criminal Act does not define gambling, the Supreme Court of Korea has one, and its most recent application is bad news for prediction markets and their supporters. In September 2025, the top court reversed a lower court’s acquittal in a case involving an online platform where users predicted the outcomes of sports matches and wagered cash-convertible “game money” against predetermined odds. The lower court had accepted the defendant’s argument that betting against fixed odds was a “speculative act” rather than gambling. The Supreme Court disagreed, defining gambling as “two or more participants wagering assets and determining gains or losses by chance,” with “chance” meaning “a situation in which the outcome is determined by facts that the parties cannot predict with certainty or freely control.” The court held that neither participants nor operators could predict or control sports results, so the platform’s wagers on game money depended on chance and constituted gambling. Thus, even if prediction marketeers say their systems are gamifying users’ inferences and predictions, Korean authorities may still conclude that because outcomes are not known in advance, they constitute a type of (illegal) gambling.

Korea is not the only country in the Indo-Pacific where policymakers are scrutinizing prediction markets. In December 2023, Taiwanese authorities arrested seventeen people and confiscated around USD 5,500 for placing bets on the outcome of the presidential election on Polymarket. In January 2025, Singaporean authorities ordered domestic internet service providers to block access to Polymarket’s website. In the United States, the Commodity Futures Trading Commission (CFTC) may limit the type of bets that consumers can place. In early June, CFTC said it wanted to regulate “prediction wagers it finds aren’t in the public interest or that seem highly susceptible to manipulation.” This comes after the April 2026 arrest of an American soldier who allegedly won over USD 400,000 after viewing classified information about the arrest of then Venezuelan leader Nicolas Maduro and his wife. 

It is unclear how the Lee administration will navigate the opportunities and challenges of prediction markets and square them with ongoing efforts to lead in aspects of the cryptocurrency space. The proposed Digital Asset Basic Act includes a framework for regulating stablecoins backed by the won. In addition to licensing and registration of firms dealing in digital assets, it also includes regulations prohibiting the use of non-public information and other efforts to manipulate the market. This follows the 2026 Economic Growth Strategy released in January 2026, which included legalizing spot exchange-traded funds (ETFs) for Bitcoin and other digital assets.The wide adoption of cryptocurrencies has made Korea a prime location for the expansion of prediction markets. As prediction markets spread and become more popular worldwide, regulators and policymakers in Korea will need to find ways to balance the public’s interest in the industry with the legal frameworks governing such activities.

Terrence Matsuo is a Non-resident Fellow at the Korea Economic Institute of America (KEI). The views expressed here are the author’s alone.

This material is distributed by KEI on behalf of the Korea Institute for International Economic Policy. Additional information is available at the Department of Justice, Washington, DC.