Can you bet a bank into collapse? Polymarket's HSBC wagers raise dangerous new questions

The United Kingdom (UK) authorities are looking into prediction Polymarket bets after people started putting real money on whether some of the world's biggest banks will collapse.

The biggest question authorities are facing is: could the bet itself become part of the problem? Online prediction market Polymarket has attracted more than $77,000 in wagers on whether major banks will fail by the end of 2026.

The list includes JPMorgan, BNP Paribas and two familiar names on Britain's high streets: HSBC and Lloyds Banking Group. The amounts are tiny compared with the trillions moving through global financial markets.

The odds aren't signalling an imminent collapse either. HSBC was recently priced at around 2% on the platform. But that isn't what has regulators and politicians worried.

Liberal Democrat MP Bobby Dean, who sits on the UK's Treasury Committee, warned that prediction markets could potentially amplify panic around a bank and contribute to a run, particularly if bets begin moving rapidly and attract attention online. That creates a strange loop. Someone bets that a bank will fail. The odds suddenly jump. Screenshots spread online. Depositors see them and start wondering whether other people know something they don't.

If enough people become frightened and pull their money, a prediction that started online could potentially feed the very panic it was betting on.

There is no evidence this is happening at HSBC or Lloyds, and a Polymarket price should not be treated as evidence that either bank is in financial trouble. Still, regulators are paying attention.

The timing is particularly sensitive.

HSBC shares dropped 4.3% and Lloyds fell 4.4% on Thursday during a wider selloff in British banking stocks as concerns over government borrowing and the upcoming UK budget rattled investors.

The Financial Conduct Authority says financial prediction markets it has examined amount to binary options, which are banned from being sold to UK retail consumers.

The regulator has also been speaking with international authorities about prediction markets and protecting market integrity.