Prediction Markets Are Coming. Is SA Ready?
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Your client WhatsApps you on a Sunday night. He made R80,000 on a political prediction market last year and wants to know what to declare. You stare at the message. Is it gambling income? Is it trading income? What form does SARS want?
Welcome to a problem that is about to become a lot more common.
A global wake-up call
In the US, the Institute of Internal Auditors (IIA) has written to Congress urging stronger regulation of prediction market platforms like Kalshi and Polymarket. These platforms let users bet real money on real-world outcomes, from elections to economic indicators. The industry already generates $2 billion in annual revenue globally, with analysts forecasting $10 billion by 2030.
The IIA's concern is straightforward. Without independent internal controls and formal governance, these platforms are vulnerable to insider trading, market manipulation, and conflicts of interest. They cited a case where a U.S. special forces soldier was accused of profiting more than $409,000 on a prediction market platform after allegedly using non-public information obtained through his involvement in a military operation targeting Venezuelan President Nicolás Maduro.
Why this matters in South Africa
Prediction markets are already accessible to South Africans via their phones. The Financial Sector Conduct Authority (FSCA) and South African Reserve Bank (SARB) have not yet issued definitive guidance on how these platforms should be classified, but that is not a safe zone. The absence of clear regulation is itself a risk.
For SA accountants, the immediate practical challenge is tax. Is prediction market income gambling income or trading income? SARS has not issued a ruling. US tax practitioners are facing the same confusion, with some winnings reported as gambling and others as securities income. The form determines the rate, and the same debate is coming here.
Until SARS clarifies, the safest position is to treat prediction market profits as gross income and declare them accordingly. Under-declaring is a far bigger risk than over-declaring, and the last thing you want is a SARS audit two years from now over something that felt like a grey area today.
What good governance looks like
The IIA is calling for formal internal control frameworks and independent audit functions across prediction market platforms. That may sound distant from your small practice, but the principle is the same one you apply every day: controls only work if they are tested, documented, and independently assured. As the KPMG-Bridging Finance case showed, assuming isolated problems are isolated is the most dangerous assumption in financial oversight.
What to do right now
Ask your clients directly. Add prediction markets to your onboarding checklist and annual client review. Treat it the same way you treat crypto: document the transactions, flag the tax uncertainty, and advise conservatively until SARS provides guidance.
The accountants who are having this conversation now will be the ones clients call when the ruling eventually arrives.
Source Article: Accounting Today