“Prediction markets” are speculative platforms designed to forecast future events. They allow participants to wager on the outcomes of specific events, containing elements of gambling. The trading activities and contracts of prediction markets are not investment products.

In summary, the main characteristics of “prediction markets” include the following.

• Predictable events: A variety of events, ranging from finance, economics, politics, sports events, and even weather-related changes.
• Trading mechanism: Typically, each event offers two options: “yes” or “no”. If participants believe the event will happen, they buy a “yes” contract, if they believe it will not, they buy a “no” contract.
• Trading price: The price fluctuates based on the buying and selling activities of participants.
• Returns: If a participant holds the contract until the event outcome is determined, those who chose correctly receive a return according to the contract, while those who chose incorrectly lose the amount of their wager.
• Trading platform: Some “prediction markets” platforms are built on blockchain and support trading with cryptocurrencies. These platforms are decentralised, enabling participants to trade directly without intermediaries.

Before considering any investment, investors should carefully reflect on the following questions.

• Investment value: Investment goes beyond merely wagering on probabilities. The decision to invest depends on the value and potential of the underlying asset. This applies to whether the investment is in equities and bonds of listed companies, precious metals, real estate, collectibles, or virtual assets.
• Asset allocation: Investing is a fundamental aspect of asset management, involving considerations such as risk management and investment horizons. Proper investing helps investors build a portfolio that aligns with their investment objectives and risk tolerance.
• Regulation and protection: To safeguard their interests, investors should understand the relevant regulations and investor protection measures before engaging in any investments.

Currently, in Hong Kong, trading activities in “prediction markets” may constitute illegal gambling. Individuals who participate in “prediction markets” do not have the protections under the Securities and Futures Ordinance or any laws and regulations administered by the Securities and Futures Commission. If problems arise, it may be difficult or even impossible to seek recourse.

Inappropriate investment attitude and behaviour can obscure the distinction between investing and gambling. With a wide range of investment options available, the public should carefully consider what investing truly means – distinguishing investing from gambling.