The limit of Law No. 31557: Where do prediction markets fit?

The emergence of prediction markets raises a specific legal question: can Peruvian remote gaming and sports betting legislation be applied to platforms where users buy and sell positions on future events?

My position is that markets structured as peer-to-peer contract trading systems are not included, by their mere nature, in Law No. 31557, as amended by Law No. 31806, or in its Regulations, approved by Supreme Decree No. 005-2023-MINCETUR.

The answer requires examining how each product works. It is not enough that there is money committed, uncertainty or possibility of profit. The regulatory qualification depends on the legal and economic nature of the operation.

Prediction markets: position trading as a differentiator

In a peer-to-peer prediction market, participants acquire positions linked to the occurrence of a verifiable future event. Their prices fluctuate based on available information and buy and sell orders. The user can hold his position until the resolution of the event or sell it early, materializing a profit or loss before knowing the final result.

In the indicated model, the platform manages the trading infrastructure, registers trades, and applies previously published settlement rules. It does not act as a counterparty, does not set prices at its discretion or participate in user losses.

These characteristics are relevant to differentiate it from an operator that accepts bets and require an analysis of three legal assumptions: betting, chance and prize.

The legal configuration of betting: economic risk is not enough

Numeral 3.1 of Article 3 of Law No. 31557 defines the bet based on the risk of a sum of money on an uncertain outcome related to regulated activities. However, taking an economic risk does not automatically turn any trade into a bet. There is also risk in the acquisition of assets and contractual rights.

In this model, the money is used to acquire a tradable position against another participant. In addition, Article 12.1.1 of the Law provides for the acceptance of the bet by means of an agreement between the player and the holder of the authorisation. In peer-to-peer trading, the platform does not accept the trade as an economic counterparty.

The difference is not merely technological: it lies in the cause and legal structure of the operation.

The delimitation of chance: uncertainty about an event does not equate to gambling

Numerals 3.7 and 3.8 of Article 3 link remote gaming with games of chance.

In the markets described, the underlying event occurs outside the platform and is verified by previously identified objective sources. Participants analyze information and negotiate prices; The Platform does not produce the event or determine its outcome. The absence of a random number generator does not, in itself, exclude the existence of chance. What is decisive is to establish whether the structure legally constitutes a game of chance.

Uncertainty and chance are not equivalent categories. Uncertainty is also present in multiple economic and contractual relationships without these taking on, by that fact alone, the nature of gambling.

The nature of economic performance: contractual settlement vs. award

Numeral 3.17 of article 3 defines the prize as the monetary remuneration obtained as a result of a winning play. In the model analysed, the settlement comes from the collateral provided by the participants themselves, without the platform financing prizes or assuming the economic risk of the result. In addition, the person who sells his position in advance can make a profit before the resolution of the event, without a winning move having been verified.

This characteristic makes it possible to distinguish the yield derived from the negotiation and settlement of contractual positions from the prize provided for in gaming legislation.

Law No. 31557 as a starting point, not as a regulation of prediction markets

Law No. 31557 constitutes the Peruvian legal framework for remote gaming and remote sports betting. However, it does not expressly provide for a regime for prediction markets structured by means of negotiable contracts between participants. This does not mean that these markets should remain exempt from any regulation. On the contrary, existing legislation can constitute a basis for developing a subsequent regulatory framework that addresses the particularities of these models, their risks and the mechanisms for protecting users.

However, any regulation requires the nature of the activity to be identified in advance and specific obligations to be established, rather than automatically extending the provisions designed for gaming and betting.

Nor can it be said that any platform called a prediction market is excluded from the Law. The qualification will depend on its effective operation and the concurrence of the legally required elements.

Legal certainty and regulatory evolution: the pending challenge

Technological innovation requires that the law evolve, but that evolution must respect the principles of legality, legal certainty and proportionality.

The existence of economic risk does not automatically convert a trade into a bet; uncertainty does not necessarily equate to chance, and every win does not constitute a prize.

Therefore, there are legal grounds to maintain that prediction markets structured as peer-to-peer contract trading systems are not included, as a model, in the regime established by Law No. 31557.

The challenge for Peru is not to force their inclusion in existing regulatory categories, but to determine whether they require their own regulatory treatment, taking advantage of the accumulated regulatory experience and recognizing the substantial differences in their operation.

Rosa Luz Nerio Urteaga is a lawyer with more than 20 years of experience in the gaming industry, specializing in regulation, licensing, corporate law and compliance. He is a Founding Partner at Nerio Legal and has held management positions in international companies in the sector, such as Max Entertainment and Grupo Dreams.