Lawyer explains the legal red lines of prediction markets: Easily suspected of opening a casino in China

Editor | Wu Talks Blockchain

In this episode, we invite legal expert Jin Jianzhih from the crypto legal field to systematically analyze the legal classification and risks faced by blockchain prediction markets across different jurisdictions. The discussion begins with the fundamental differences between prediction markets and traditional gambling, comparing the regulatory logic of the US, which treats them as financial derivatives, with China and most other regions, which classify them as gambling. Lawyer Jin focuses on dissecting the potential criminal or administrative risks for project operators, promoters (KOLs), and ordinary users under China’s legal framework. He also shares real cases from Mainland China and Hong Kong to illustrate how political, electoral, and other sensitive topics can significantly increase enforcement probability. Finally, he offers insights on future regulatory developments and provides three core legal risk reminders, emphasizing the importance of maintaining clear legal boundaries while pursuing crypto innovation and hot topics.

Lawyer Jin points out that operating prediction markets in Mainland China is essentially equivalent to running a casino. If promoted via KOLs or advertising fees, it is likely to be considered as aiding and abetting illegal gambling. Supporting operational aspects like providing payment channels also carries legal risks, and almost all such support can be deemed as conspiracy to operate illegal gambling. For ordinary players, generally, there is no criminal offense.

This content reflects the personal opinions of the guest and does not represent Wu Talks’ views. The audio transcription was performed by GPT and may contain errors. Please listen to the full podcast on platforms like Xiaoyuzhou, YouTube, etc.

Background of Lawyer Jin Jianzhih and His Entry into Crypto Law

Host: Hello everyone, welcome to Wu Talks. Recently, prediction markets based on blockchain have become very popular, from US elections to sports events—everyone wants to be a prophet. But what are the actual legal risks involved in this process? Today, we are very honored to invite Lawyer Jin Jianzhih, who has insightful perspectives in crypto law, to help us clarify key points. Welcome, Lawyer Jin. First, could you introduce yourself and share what motivated you to enter the crypto legal field?

Jin Jianzhih: Hello everyone, I am Jin Jianzhih, a lawyer mainly providing legal and compliance services for crypto industry practitioners. I am honored to be on Wu Talks. Personally, I fully entered the crypto legal industry in 2023. At that time, I felt that the traditional legal market was already in decline, with lawyers’ incomes becoming harder to sustain and young lawyers’ salaries stagnating. I realized that, as a young lawyer, if I continued on this path, I might be phased out by the industry.

Coincidentally, during a chat with former colleagues, I learned that the partner of my first law firm had bought Bitcoin long ago. I initially thought their wealth came solely from legal fees, until the current industry situation shocked me. Later, when I considered transitioning, an algorithm recommendation led me to a law firm’s information on Xiaohongshu, which ultimately brought me into the crypto legal field. Although, as a Mainland Chinese lawyer, I face regulatory restrictions on cryptocurrencies, and my legal practice isn’t as extensive as I expected, there are few lawyers working in this area, so I can still navigate this industry relatively comfortably.

Challenges in Legal Education in Crypto and Language Style Choices

Host: We notice you often explain complex legal issues in very down-to-earth ways. Is this a deliberate style choice? What do you think are the main difficulties in legal education within the crypto world?

Jin Jianzhih: My language style isn’t actually that colloquial; it’s mainly because most of my audience are newcomers with limited legal knowledge, especially in the crypto circle where awareness of legal issues is generally weak. So, to effectively educate the public, I need to use straightforward, plain language. This is also important on platforms like Twitter, where simple and clear language is more effective. If you use flowery or overly grandiose words, it might not suit the platform.

I also feel that my language isn’t extremely colloquial; it still contains some legal jargon. Some netizens have criticized me, saying I pretend to understand but don’t. I think if my language were truly as down-to-earth as possible, I wouldn’t face criticism, but in reality, I still get some flak. So, I believe I haven’t quite reached that “grounded” level.

Host: I’ve read your articles, and I find your language quite humorous and witty. But I think the reason you might get criticized is because, regardless of what you say, there will always be critics.

Uncertainty in Chinese Crypto Regulation and Practitioner Cognitive Biases

Host: Where do you see the main difficulties in legal education in the crypto space?

Jin Jianzhih: The main difficulty is that I am a Mainland Chinese lawyer serving Chinese practitioners. The biggest issue is that our country’s regulation of crypto isn’t as comprehensive as imagined. That is, the basic laws and regulations are absent; everyone involved—practitioners and legal service providers—are in the dark about the regulatory landscape. This is the greatest challenge because you cannot predict what regulators will do, so you can only prepare for the worst-case scenario and plan compliance accordingly. That’s a huge challenge.

Second, due to the lack of specific regulation, enforcement cases are quite rare. As a result, many practitioners develop a kind of luck mentality, thinking it won’t happen to them, or even consciously resisting legal advice. Sometimes, practitioners believe certain risks won’t materialize, or at least not to them. This is another difficulty.

Differences Between Prediction Markets and Traditional Gambling and Their Social Value

Host: Let’s start from a macro perspective. In your opinion, what is the core appeal of blockchain-based prediction markets? How do they differ legally from traditional gambling?

Jin Jianzhih: From a product perspective, prediction markets are quite different from traditional gambling. Traditional gambling has relatively limited forms—mainly three: sports betting (like betting on football matches), probability games (like slot machines, roulette, baccarat), and lotteries. Lotteries are usually state-controlled, with proceeds often used for public welfare. Although lotteries are technically a form of licensed gambling, public perception generally views them more favorably than other gambling forms.

Prediction markets, however, are highly diverse. Beyond probability games and lotteries, almost any real-world event can be a prediction target—sports, elections, weather policies, financial markets, etc. Intuitively, the biggest difference from traditional gambling is that prediction markets rely not just on chance but on participants’ judgment, knowledge, and analytical skills to forecast future developments. This makes prediction markets more of a comprehensive test of participants’ abilities, and not purely a probabilistic process.

In other words, prediction markets act as information aggregators, collecting judgments from many individuals to reflect societal consensus more accurately. Such a mechanism could bring higher social value, but the question is whether this view is legally accepted. Do judicial authorities and law enforcement in different regions recognize this? First, all laws and regulations are territorial—they vary by country and region, with different legal philosophies and interests to protect.

Therefore, there are mainly two perspectives on the legal classification of prediction markets: one from the US, and another from outside the US. In the US, mainstream opinion considers prediction markets as financial derivatives. To operate legally, one must obtain a derivatives trading license from the Commodity Futures Trading Commission (CFTC). For example, Kalshi has obtained such a license, making it fully compliant in the US. Polymarket has also spent $100 million acquiring a licensed exchange. It’s expected to re-enter the US market by the end of this year or next.

Outside the US, in Europe and Asia, prediction markets are generally regarded as gambling platforms. If gambling is legal locally, then operating prediction markets would require a gambling license; if gambling is illegal locally, then engaging in prediction markets could lead to serious legal consequences. From a legal standpoint, the fundamental difference between prediction markets and traditional gambling is minimal; most regulators currently see little distinction.

Legal Recognition of Gambling and Casino Operations Under Chinese Criminal Law

Host: Could you systematically analyze the different risks faced by various roles within the prediction market ecosystem? For example, if project developers or initiators set up servers domestically, or if overseas projects target mainland users, what crimes might they violate? Such as organizing gambling, or possibly illegal business operations?

Jin Jianzhih: As mentioned earlier, outside China, the regulatory approach is simpler—most consider prediction markets and gambling to be quite similar. Returning to Chinese law, especially how gambling is defined, there are three relevant crimes: gambling crime, operating a casino, and organizing or participating in foreign gambling.

First, gambling crime: the Criminal Law stipulates that if someone conducts gambling for profit or makes gambling their profession, they can be sentenced to up to three years and fined. Specific behaviors include organizing three or more people to gamble, taking rake fees exceeding 5,000 yuan, or gambling funds exceeding 50,000 yuan, or over 20 participants, or organizing more than 10 Chinese citizens to gamble abroad and taking kickbacks or referral fees—all constitute gambling conspiracy.

Regarding gambling as a profession, it refers to individuals whose main income comes from gambling activities. Cases convicted solely on “gambling for a profession” are relatively few. Operating a casino involves organized crime: providing venues, equipment, and rules for profit-making gambling activities. If the circumstances are mild, penalties include up to 5 years’ imprisonment and a fine; more severe cases can lead to 5–10 years’ imprisonment and fines.

Specifically, what constitutes operating a casino? For example, creating a gambling website accepting bets, or providing a platform for others to organize gambling. Also, acting as an agent for gambling sites, accepting bets, or sharing profits from gambling websites—all are considered operating casinos. When betting amounts reach 300,000 yuan or more, or the number of participants exceeds 120, it becomes a serious case, with a maximum of 5–10 years’ imprisonment. In the online era, these thresholds are easily met—betting 30,000 yuan is not large, but with over 120 participants, it’s quite straightforward, especially on online platforms.

Additionally, the 2021 Criminal Law Amendment introduced the crime of “organizing or participating in foreign gambling,” which has a higher threshold—requiring large amounts or serious circumstances. The law does not specify what “large amounts” are, so there are no clear precedents yet, and it’s uncertain which cases might be prosecuted under this.

The core legal principle behind gambling crimes in China is to protect the social value of diligent, honest work. Unlike the US, which encourages financial innovation, China’s regulation aims to safeguard the basic livelihood of its citizens. Therefore, prediction markets are almost certainly not recognized as legal in China.

Legal Risks for Different Participants in Prediction Markets

Host: What about the legal risks for different participants? For example, if you are a project operator in Mainland China, what legal issues do you face if you run a prediction platform? If you set up servers domestically or target mainland users, what crimes could you be committing? Such as organizing gambling or illegal business operations?

Jin Jianzhih: As we discussed, outside China, the approach is simpler—most see prediction markets as similar to gambling. Returning to Chinese law, the key is how gambling is defined. The Criminal Law specifies three crimes: gambling crime, operating a casino, and organizing or participating in foreign gambling.

First, gambling crime: if someone conducts gambling for profit or makes it their main activity, they can be sentenced to up to three years and fined. Specific behaviors include organizing three or more people to gamble, taking rake fees over 5,000 yuan, or gambling funds exceeding 50,000 yuan, or involving over 20 participants, or organizing more than 10 Chinese citizens to gamble abroad and taking kickbacks or referral fees—all constitute gambling conspiracy.

Operating a casino involves organized criminal activity: providing venues, equipment, rules, and controlling the process for profit. If the circumstances are mild, penalties include up to 5 years’ imprisonment and fines; more serious cases can lead to 5–10 years’ imprisonment.

What exactly is considered operating a casino? For example, creating a betting website, accepting bets, or providing a platform for others to organize gambling. Acting as an agent or sharing profits from gambling sites also qualifies. When betting amounts reach 300,000 yuan or more, or the number of participants exceeds 120, it’s a serious case, with a maximum of 5–10 years’ imprisonment. Online, these thresholds are easily met—betting 30,000 yuan or having over 120 participants is straightforward.

In 2021, the Criminal Law Amendment added the crime of “organizing or participating in foreign gambling,” which requires large sums or serious circumstances. The law does not specify “large sums,” so no clear case law exists yet.

The fundamental legal principle is to protect the social value of honest work. Prediction markets are unlikely to be recognized as legal in China.

Legal Risks for Ordinary Users

Host: For ordinary users participating in prediction markets, what are the legal risks? Will they face criminal charges or administrative penalties?

Jin Jianzhih: Generally, for individual users, participation alone usually does not constitute a criminal offense. It’s similar to playing small-scale gambling—if you’re not making it your main income source or organizing others, it’s unlikely to be prosecuted criminally. However, if the betting amount is large, authorities might impose administrative penalties, such as detention or fines, depending on local regulations.

For example, if the bet amount exceeds certain thresholds—say, over 5,000 yuan—local police might detain you for a few days or impose a fine. The specific standards vary by region: Beijing considers over 500 yuan as a large amount, Shanghai over 100 yuan, Shenzhen over 500 yuan, Sichuan over 1,000 to 4,000 yuan. So, if you participate in a prediction market in Shanghai and bet 15U (about 15,000 yuan), you could face administrative detention.

Host: Understood, it depends on local enforcement attitudes.

Jin Jianzhih: Exactly. For regular users, criminal charges are unlikely, but administrative penalties are possible. The thresholds differ across regions. Many users on prediction platforms bet amounts of 50U to 100U or more. In Shenzhen and Beijing, this might not meet the “large amount” standard, but in Shanghai, it could. If you are a project operator or promoter, based on current laws, you could be considered as aiding and abetting illegal gambling, possibly being prosecuted for operating a casino.

Hong Kong’s Regulatory Logic and Territorial Jurisdiction

Host: Hong Kong is actively embracing virtual assets. How does Hong Kong’s regulatory attitude towards prediction markets differ from Mainland China? Is there some gray area?

Jin Jianzhih: Hong Kong has a Gambling Ordinance that prohibits unauthorized or unlicensed gambling. In other words, Hong Kong does allow some licensing, but it’s not open to everyone—only a limited window. Hong Kong is a common law jurisdiction, and like most common law regions, its criminal law follows territorial jurisdiction—meaning, if a crime occurs wholly or partly within Hong Kong, Hong Kong has jurisdiction. This is very different from Mainland China’s personal jurisdiction principle.

For example, if you are a Hong Kong resident conducting prediction market activities abroad that do not target Hong Kong residents, then technically, it’s not a crime in Hong Kong. This differs greatly from Mainland law. Conversely, if you are a Mainland Chinese citizen, even if you run a prediction market outside China that does not target Chinese users, you could still face legal risks under Mainland law. This reflects the differences between common law and civil law systems, with no inherent superiority—just different legal paths chosen historically.

As for future changes, Hong Kong’s market size is relatively small. If a prediction market only targets Hong Kong residents, it’s practically impossible to operate profitably. Therefore, if Hong Kong project developers want to engage in prediction markets, they can operate offshore under Hong Kong jurisdiction, avoiding local regulation, and not target Hong Kong users. This way, they can run compliant operations abroad and sidestep Hong Kong’s restrictions. Whether Hong Kong relaxes its policies or not, for those wanting to do overseas business, the impact is minimal.

Scarcity of Enforcement Cases in Mainland China and Reasons

Host: Returning to Mainland China, it’s interesting that there are currently no large-scale, public enforcement cases targeting pure prediction markets. Why do you think regulation is so lagging? Is it due to technical difficulties in evidence collection, or because the social harm hasn’t been sufficiently recognized?

Jin Jianzhih: That’s correct. Enforcement cases in Mainland China are scarce because prediction markets are still relatively new, and regulation hasn’t caught up with industry development. However, there are some cases. For example, in 2021, the Supreme Court issued a guiding case on casino operations (Case No. 146). If interested, you can look it up. It involved a group of financial practitioners who created a website called “Longhui,” where users could predict forex prices—buying calls or puts, similar to certain “poker” events. Although these transactions appeared like options trading, the court explicitly stated that such binary options are essentially gambling—no different from betting, just disguised as options. The website was thus deemed a gambling site.

From this ruling, it’s clear that similar legal reasoning applies to current prediction markets. If regulators scrutinize such platforms, they could be classified as “running a casino.” So, although enforcement cases are few, the legal basis suggests that prediction markets could be treated as gambling if caught.

Future of Compliant Prediction Markets

Host: How do you see future regulation evolving? Is there a possibility for compliant prediction markets?

Jin Jianzhih: In the US, there are already compliant prediction markets. The US considers these as financial derivatives—whether event contracts or binary options—they are a form of financial product. To operate legally, one only needs to obtain a license from the Commodity Futures Trading Commission (CFTC). For example, Kalshi has such a license, making it fully compliant. Polymarket also spent $100 million acquiring a licensed exchange, and it’s expected to re-enter the US market later this year or next.

Outside the US, regulatory environments are more complex. It’s unlikely that fully compliant prediction markets will emerge in the short term. Changing the perception that prediction markets are gambling and recognizing their social value as financial derivatives is very difficult. Although the concept of financial derivatives is understood, convincing regulators that they have social benefits is challenging under current societal conditions.

For instance, predicting sports results is similar to existing lotteries, which fund public welfare. You can also predict match outcomes on platforms like Polymarket or Bilibili during major tournaments. These products already meet some needs.

For other event predictions—such as elections, weather, or financial markets—regulators may see little social value. From their perspective, they prefer to protect the traditional, diligent lifestyle of Chinese citizens. Bridging the gap between this mindset and the social value of prediction markets is tough. Convincing regulators to abandon their current stance and adopt a US-style approach that encourages financial innovation is very difficult. Moreover, China is not unique—most countries’ regulatory philosophies are similar, emphasizing state oversight. The motivation to change is minimal. Therefore, although US regulation may gradually evolve, and other countries might loosen restrictions, fully embracing prediction markets remains a significant challenge.

Three Core Legal Risk Reminders and Summary

Host: Please share three key legal risk reminders for our audience.

Jin Jianzhih: Regarding prediction markets, I’d say that gambling is an age-old, traditional form of entertainment. Small bets are acceptable, and small-scale gambling usually doesn’t involve illegal activity.

Second, I know many on Twitter see Polymarket as a new form of finance, and I agree with this business perspective. Business understanding can be ahead of legal reality, but always respect the legal framework of your jurisdiction. If you want to do something, plan carefully and protect yourself.

Finally, crypto industry regulation is relatively lagging but evolving rapidly. The longer you stay in the industry, the more likely your legal awareness may weaken. Stay sensitive to legal issues, especially by following high-quality legal media like Wu Talks, and keep alert to legal boundaries at all times.