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UK urged to act over Polymarket bank failure bets on HSBC and Lloyds
UK authorities are being urged to intervene after Polymarket bank failure bets worth $77,507 (£58,530) emerged, with users taking positions on whether the world's biggest banks - HSBC and Lloyds among them - will go under by the end of the year.
By Haut Monde Post
• October 3, 2026
• 5 Min Read
UK authorities are being urged to intervene after Polymarket bank failure bets worth $77,507 (£58,530) emerged, with users taking positions on whether the world's biggest banks - HSBC and Lloyds among them - will go under by the end of the year.
The bets and the banks they name
Polymarket is a US-owned company whose prediction markets cover subjects from football matches and the existence of aliens to when a bomb drops on a city. Users had taken $77,507 (£58,530) worth of positions on whether the world's biggest banks will go under by the end of this year.
The markets include lenders ranging from JP Morgan to BNP Paribas, as well as two of the largest on UK high streets:
- •JP Morgan
- •BNP Paribas
- •HSBC
- •Lloyds Banking Group
Who is barred and who slips through
Residents of the UK, US, Canada and the EU are banned from betting on Polymarket's offshore platform. The bans still leave punters from across roughly 150 countries in a position to profit from events that would create huge financial instability.
The way the platform is built blunts those restrictions:
- •Accounts are linked to crypto wallets that can be publicly traced but are hard to link to an individual.
- •Polymarket is headquartered in the US, but its markets are international and its users are anonymous.
- •Some users from restricted countries find workarounds via virtual private networks (VPNs), despite this violating Polymarket's terms of use.
Warnings from Westminster, ESMA and academia
Concerns are growing over insider trading and market manipulation on Polymarket by bad actors hoping to win big on online bets. The banking industry has already been told to prepare for the risk of social media-fuelled bank runs, where customers withdraw cash at speed. Silicon Valley Bank and Credit Suisse went under in 2023 after big stock sell-offs and runs on the banks, accelerated by a frenzy of speculation on platforms such as X and WhatsApp.
Treasury committee member and Liberal Democrat MP Bobby Dean said UK authorities should intervene, arguing Polymarket has a poor reputation for stopping insider trading or bad actors placing bets on its platform. He warned that if the bank-related activity grows on the platform and a particular market then escalates rapidly, it could even trigger bank runs. Those risks should not be ignored because they are relatively small today, he argued. He added:
"I would urge our regulators to get in contact with their counterparts in the US to raise concerns"
Academics have warned the platforms create a serious moral hazard, giving market participants an incentive to engage in corrupt, illegal or dangerous actions in order to rig the outcome of the contract. In its twice-yearly risk report last month, the European Securities and Markets Authority (ESMA) said a growing number of incidents illustrates that prediction markets are rife with inside trading.
The regulator said market manipulation and insider trading risks reach new levels on DLT-based (distributed ledger technology) platforms such as Polymarket, which operate with limited identity verification and where the platform itself may not know who is behind a given wager.
ESMA's report cited the US-Israel strike on Iran in February, when several newly created wallets reportedly generated $1.2m in profits shortly before the military operation became public.
That followed the US capture of Venezuela's leader Nicolás Maduro in January, over which a US soldier was criminally charged for allegedly using classified information to place profitable bets on Polymarket ahead of the operation. In April this year, police were notified over suspected tampering of weather sensors at Charles de Gaulle airport that were used to settle Polymarket weather contracts.
Polymarket's defence and the regulators' answer
Polymarket bosses said they did not see a problem with the bets themselves, arguing they were democratising markets that were previously restricted to elite traders and institutions. Chief legal officer Neal Kumar said:
"The information in these markets is already public. Banks, hedge funds and credit professionals have had access to credit default swap markets for years"
He said people should not need to work at an institution to have access to information on a topic of this importance, such as bank failures. Polymarket simplifies the question, providing a much larger audience with information, and markets serve as a powerful source of information and of combating disinformation, he added.
The UK's Financial Conduct Authority said it had been speaking to international regulators about prediction markets, as part of efforts to protect "market integrity". The Bank of England said its supervisors engage regularly with companies on a wide range of market developments and emerging risks.
Lloyds and HSBC declined to comment, and the UK Treasury did not respond to requests for comment.
