Picture two people in a London pub arguing about who wins the next general election. One opens IG and places a spread bet on Labour seats, quoting a buy price of 348 and a sell price of 342, sizing at twenty quid a seat. The other opens Smarkets, the UK-licensed exchange, and buys a Yes contract on Labour majority at 62p. Both of them are trading the same underlying reality. They are doing it through completely different machinery.
That machinery matters. It changes how you size your position, how you exit, how badly a wrong call can hurt you, and how the taxman treats your winnings. UK readers tend to know spread betting well, because the country invented it and roughly a million accounts exist across IG, City Index, Spreadex and the rest. Event contracts are the newer cousin, regulated as financial instruments in the US, treated more cautiously here. The two products rhyme more than they match.
The shape of each trade
A spread bet quotes a number. The FTSE will close at 8,240. Labour will win 348 seats. Harry Kane will score 22 league goals this season. You decide whether the real outcome lands above or below that number, and you pick a stake per point. If you buy Labour seats at 348 for ten pounds a point and Labour wins 360, you make 120 pounds. If they win 330, you lose 180. The loss scales linearly with how wrong you were, and in volatile markets that scaling can chew through your account before you have time to react.
An event contract is binary. The question is Yes or No. Does Labour win a majority? Does Bitcoin close above $100,000 on 31 December? You buy Yes at some price between 0 and 100 (pence or cents depending on the venue), and at expiry it settles at either 100 or 0. Your maximum loss is your stake. Your maximum gain is the distance from your entry price to 100. The payoff is bounded on both ends, which makes the worst-case arithmetic much easier.
That boundedness is the single biggest mechanical difference. Spread betting is unbounded in both directions unless you attach a guaranteed stop. Event contracts cap your downside automatically, every time.
How the price actually moves
There is a quieter difference that matters once you start trading either product seriously. A spread-betting firm makes the price. IG quotes you 348 to buy and 342 to sell, and that spread is the house's margin. The firm is your counterparty, and most of the time it is internalising your trade against the rest of its book rather than hedging it into a real market. The price reflects the firm's view of where the outcome will land, informed by underlying markets where they exist, and softened by whatever risk the dealing desk wants to lay off.
An event contract price is set by the order book. Other traders are on the other side. When the Yes price on a Labour majority moves from 62p to 68p, it is because someone paid up to buy, or someone hit the bid to sell. The implied probability is doing real work. Our guide to how prediction market odds work walks through the maths, but the headline is that 62p means the market thinks there is a 62% chance of the outcome.
Which price is more honest? Reasonable people argue both sides. Spread-betting firms have professional pricing teams and serious capital. Event-contract order books can be thin, especially on UK-relevant questions, and a few large orders can push the price further than the underlying news justifies. But event contract prices are at least visible as probabilities, and they are not optimised to extract a house margin from a one-sided book.
The tax question
This is where UK readers usually lean in. Spread-betting profits in the UK are not subject to capital gains tax or income tax. The legal logic is that spread betting is gambling, and gambling winnings are not taxed. That single fact is why IG and CMC built billion-pound businesses on the back of UK retail traders who wanted equity exposure without HMRC paperwork.
Event contracts are messier. If you trade them through a US-regulated venue like Kalshi, they are financial instruments under CFTC rules and gains are likely taxable in the UK as capital gains or miscellaneous income, depending on how often you trade and how HMRC characterises the activity. If you trade them on Polymarket or Smarkets, the treatment depends on whether the platform is classified as a gambling operator or a financial venue. Our breakdown of prediction-market tax treatment in the UK and US goes into the detail, and the honest summary is that the rules have not caught up with the products.
For a UK trader with a simple objective and a moderate stake, the tax-free status of spread betting is a real edge. It is one of the few areas where UK retail finance is genuinely better than the US equivalent.
What you can actually trade
Spread-betting menus are wide and deep on the financial side. Every major equity index, hundreds of single stocks, commodities, currency pairs, government bonds. The political and event coverage is real but narrow. IG and Spreadex will quote you UK general election seats, US presidential winner, next prime minister, but the range stops well short of what Polymarket lists.
Event contracts are the opposite shape. The financial coverage is thinner. Kalshi has Fed-rate contracts and some economic-data prints, but you cannot use it to short the FTSE with leverage. Where event contracts dominate is everything else. Elections in fifty countries, geopolitical questions, sports beyond the mainstream, pop culture, regulatory decisions, even weather. If you want to trade whether the Bank of England cuts rates at its next meeting, both products work. If you want to trade whether a specific senator survives a primary, only event contracts will quote it.
Leverage, margin and the way losses arrive
Spread betting is leveraged. You put up margin, often as little as 5% of the notional exposure for a major index, and the firm fronts the rest. That is how a ten-pound-a-point bet on the FTSE can produce a 500-pound swing on a normal day. It is also how spread-betting accounts blow up in hours when the market moves against a leveraged position and the margin call hits before the trader is even awake.
Event contracts do not have margin in the same sense. You pay the full price of the contract up front. If you buy 1,000 Yes contracts at 62p, you have spent 620 pounds and that is the maximum you can lose. There is no margin call, no overnight financing, no risk of a gap move taking you below zero. The trade-off is that you cannot manufacture leverage. If the contract moves from 62p to 64p, that is a 3% gain, not a 30% gain.
This is why the two products attract slightly different temperaments. Spread betting rewards traders who like leverage and accept that leverage cuts both ways. Event contracts suit traders who want to express a binary view, cap their downside, and treat each position as a discrete bet rather than a leveraged exposure.
Regulation, and where the UK actually sits
Spread betting is regulated by the FCA as an investment activity, even though the tax treatment is gambling. That contradiction is decades old and the industry has built around it. Firms are authorised, client money is segregated, negative balance protection is mandatory for retail clients. The product is mainstream, advertised on television, treated as a legitimate way to trade.
Event contracts in the UK occupy stranger ground. UK regulation restricts the kinds of binary contracts retail clients can be offered, partly as a response to the binary-options scandals of the late 2010s. Smarkets and Betfair Exchange offer event-contract-shaped products under gambling licences. Polymarket is not authorised for UK retail and geoblocks UK users at the platform level, with two regulators bearing on it: the Gambling Commission, which treats prediction markets as gambling requiring a licence, and the FCA, whose 2019 binary-options ban covers contracts that settle at either nothing or a fixed sum. Our guide to whether prediction markets are legal in the UK covers the current state of play.
The direction of travel is toward more event-contract activity onshore, not less, but the regulatory ceiling is real and worth knowing about before you size a position.
The editorial take
For a UK trader who wants leveraged exposure to financial markets with tax-free profits, spread betting is the better tool. Decades of infrastructure, deep menus on financial instruments, FCA oversight, no HMRC paperwork. The product does what it says.
For a trader who wants to express a view on a specific real-world outcome that is not a financial instrument, an event, an election, a regulatory decision, event contracts are the better tool. Bounded downside, transparent probability pricing, and a market depth on political and cultural questions that no spread-betting firm matches.
The two are not really competing for the same trade. They are competing for the same trader, at different moments. Most serious users of one will eventually find themselves wanting the other.
iPredicta tracks event-contract markets across the platforms UK readers can actually reach, with the implied probabilities surfaced cleanly and the regulatory status of each venue noted up front. The site is built for the trader who already understands spread betting and wants to see where event contracts add something useful, rather than for the one being sold a product.
Frequently asked questions
Are event contracts legal for UK residents?
Some are, some are not, depending on the venue. UK-licensed platforms like Smarkets and Betfair Exchange offer event-contract-shaped products under gambling licences, and these are straightforwardly legal for UK residents. Kalshi is a CFTC-regulated US venue and does not formally accept UK clients. Polymarket is not authorised for UK retail use and geoblocks UK IP addresses at the platform level. Two regulators bear on it: the Gambling Commission treats prediction markets as gambling requiring a licence, and the FCA's 2019 binary-options ban applies because these contracts settle at a fixed sum or nothing. The safe path for a UK trader is to use UK-licensed venues for event-contract exposure and to read the terms of any offshore platform carefully.
Is spread betting tax-free in the UK?
Yes, spread-betting profits are not subject to UK capital gains tax or income tax for individual retail traders. HMRC treats spread betting as gambling, and gambling winnings are not taxable for the bettor. This applies whether you trade indices, single stocks, commodities or political markets through an FCA-regulated spread-betting firm. The treatment does not extend to spread-betting income that constitutes your trade or profession, which is rare in practice and HMRC has historically not pursued. It also does not extend to contracts for difference, which are taxed as capital gains even though they trade similarly. The tax status is a genuine UK retail edge, and it is one of the main reasons spread betting remains so much larger here than equivalent products elsewhere.
Can you lose more than your stake on an event contract?
No, the maximum loss on an event contract is the price you paid. If you buy a Yes contract at 62p, the worst case is that it settles at 0 and you lose 62p per contract. There is no margin call, no overnight financing, no risk of a gap move taking your account below zero. This bounded downside is the cleanest mechanical difference between event contracts and spread betting, where a leveraged position can produce losses several times your initial margin if the market gaps against you. The trade-off is that event contracts do not give you leverage. You are paying the full economic cost of the position up front, every time.
Which has better liquidity, spread betting or event contracts?
Spread betting generally has deeper liquidity on financial markets, while event contracts have deeper liquidity on political and event markets. A spread-betting firm will quote you a tight spread on the FTSE or EUR/USD at almost any size a retail trader cares about, because they are making the market and hedging into the underlying. Event-contract order books on prediction markets can be thin, especially on UK-specific questions, and a single large order can move the price further than the news warrants. On a major US presidential market in the run-up to an election, the picture flips entirely and event-contract liquidity dwarfs anything a spread-betting firm offers. Match the product to the question.
Can I arbitrage between spread bets and event contracts on the same outcome?
In theory yes, in practice rarely. When IG quotes Labour seats and Polymarket prices Labour majority, both are expressing views on the same election but in different units, so any arbitrage requires translating between a continuous seat spread and a binary majority threshold. The conversion is doable for a quant-minded trader but the residual model risk is real. On directly comparable questions, next US president for example, the prices on regulated event-contract venues and spread-betting firms tend to track each other closely because professional traders are already watching the gap. Our guide to prediction-market arbitrage covers why the gaps that do appear are usually smaller than they look.