Author: Wu Says Blockchain
In this episode, we invite lawyer Jin Jianzhi, who specializes in cryptocurrency law, to systematically analyze the legal classification and risks faced by blockchain prediction markets in different jurisdictions. The discussion begins with the essential differences between prediction markets and traditional gambling, contrasting the regulatory logic where the U.S. views them as financial derivatives, while China and most regions classify them as gambling. Lawyer Jin focuses on the potential criminal or administrative risks that different roles, such as project parties, promoters (KOLs), and ordinary users, may face under Chinese legal frameworks, and illustrates how sensitive topics like politics and elections can significantly amplify enforcement probabilities with real cases from mainland China and Hong Kong. Finally, he assesses the potential evolution of future regulations and provides three core legal risk reminders, emphasizing the need to maintain a clear legal boundary awareness while pursuing cryptocurrency innovation and trends.
Lawyer Jin points out that operating a prediction market in mainland China is essentially equivalent to running a casino. If you promote this platform through KOLs and receive advertising fees, you will likely be deemed an accomplice to the crime of operating a casino. If you participate in other operational support, such as providing payment channels, there are also legal risks, and you could almost all be classified as accomplices to the crime of operating a casino. As for ordinary players, they typically do not constitute a criminal offense.
The content reflects the guest's personal views and does not represent the views of Wu Says. The audio transcription was completed by GPT and may contain errors. Please listen to the complete podcast on platforms like Xiaoyuzhou and YT.
Background of Lawyer Jin Jianzhi and His Entry into Cryptocurrency Law
Host: Hello everyone, welcome to Wu Says. Recently, blockchain-based prediction markets have become very popular, from the U.S. elections to sports events, everyone wants to be a prophet. But how significant are the legal risks we face in this process? Today, we are very honored to invite lawyer Jin Jianzhi, who has profound insights in the field of cryptocurrency law, to highlight the key points for us. Welcome to our program, Lawyer Jin. Could you please introduce yourself to our audience and share what led you to enter the field of cryptocurrency law?
Jin Jianzhi: Hello everyone, I am Jin Jianzhi, a lawyer primarily providing legal and compliance services to practitioners in the cryptocurrency industry. I am very honored to be invited to participate in Wu Says' podcast. Personally, I fully entered the cryptocurrency law industry in 2023. At that time, I felt that the traditional legal market had entered a stage of decline, and it was becoming increasingly difficult for lawyers to maintain their income, with young lawyers' salaries also struggling to rise. I realized that as a young lawyer, if I continued to stay in the field, I might only be eliminated by the industry.
During this period, I had a chance conversation with a former colleague and learned that the partner of my first law firm had purchased Bitcoin a long time ago. I had previously thought their wealth came entirely from legal fees until the current state of the industry shocked me greatly. Later, after I had the idea of transitioning, an algorithm recommended a law firm to me on Xiaohongshu, and I eventually entered the field of cryptocurrency law. Although, as a mainland lawyer, I am subject to China's regulatory restrictions on cryptocurrencies, and the legal business is not as abundant as I expected, there are not many lawyers engaged in this work, so I can still manage to navigate this industry.
Challenges of Legal Education in the Cryptocurrency Field and Language Style Choices
Host: We noticed that you often interpret complex legal issues in a very down-to-earth manner. Is this style intentional? Where do you think the challenges of legal education in the Crypto world lie?
Jin Jianzhi: My language style is not as down-to-earth as it may seem; it is mainly because, as a lawyer, my audience largely consists of novices who are not very familiar with the law, especially in the crypto circle, where people's awareness of legal issues is generally weak. Therefore, to effectively educate the public about the law, it is necessary to use more straightforward language. This is something that also needs to be considered when generating traffic on Twitter, as the language needs to be simple and clear. On Twitter, if you say something that is grandiose or overly complicated, it may not be suitable for that platform.
I also feel that my language is not that down-to-earth; it still carries some legal jargon. Previously, some netizens criticized me, saying that I pretended to understand things I didn't. I think if my language were truly down-to-earth to the extreme, I might not have faced criticism, but in reality, I still get criticized, so I believe I have not reached that level of being "down-to-earth."
Host: I have read some of your articles, and I find your language to be very humorous and witty. However, I think the criticism you receive is quite common; no matter what you post, there will always be critical voices.
Uncertainty of Cryptocurrency Regulation in China and Cognitive Bias Among Practitioners
Host: Where do you think the challenges of legal education in the Crypto world lie?
Jin Jianzhi: The challenge of legal education primarily stems from the fact that I am a mainland lawyer serving Chinese practitioners. The biggest issue is that our country's regulation of crypto is not as comprehensive as one might imagine. In other words, the most basic legal and regulatory systems do not exist, and everyone—practitioners and lawyers providing legal services to this industry—has an unknown understanding of the regulations. This is actually the biggest challenge because you cannot predict what the regulators will do, so you can only make compliance plans for all practitioners based on the worst-case scenario, which is a significant challenge.
Secondly, due to the lack of specific regulations, there are also relatively few actual enforcement cases. Therefore, many practitioners may have a sense of luck, thinking that these issues will not happen to them, and may even consciously resist lawyers' advice. Sometimes, practitioners feel that certain things won't happen, or at least won't happen to them. This is also a challenge.
Discussion on the Product Differences and Social Value Between Prediction Markets and Traditional Gambling
Host: Let's start from a macro perspective. In your view, what is the core appeal of blockchain-based prediction markets? What are the legal differences between them and traditional gambling?
Jin Jianzhi: From a product perspective, I believe there are significant differences between prediction markets and traditional gambling. The types of traditional gambling are actually quite limited, and the more mature forms of gambling can be roughly divided into three categories: one is sports betting, such as betting on football; the second is probability games, such as slot machines, 11 points, baccarat, etc., which are all considered probability games; the third is lotteries, which are state monopolies, and the revenue from lotteries is usually used for public welfare purposes. Even though lotteries essentially belong to a licensed form of gambling, they are generally perceived more positively in society than regular gambling.
Prediction markets, on the other hand, have a very diverse gameplay. Besides probability games and lotteries, almost all real-world events, sports events, elections, weather policies, financial markets, etc., can become subjects of prediction. From an intuitive perspective, the biggest difference between prediction markets and traditional gambling is that they do not solely rely on probability; instead, they require participants to predict the development of future events based on their judgment, knowledge, and analytical abilities. This predictive method clearly tests the comprehensive qualities of participants, so it is not entirely a process determined by probability.
In other words, prediction markets act as information aggregators, gathering the judgments of many people, which can more accurately reflect social consensus. This mechanism may bring higher social value, but the question is whether this view can be accepted legally. Do different judicial authorities and enforcement agencies in various regions recognize this perspective? First of all, all laws and regulations have regional characteristics, meaning that different countries and regions have different legal and regulatory systems, and the regulatory philosophies and interests they aim to protect also vary.
Therefore, when making legal judgments about prediction markets, there are mainly two viewpoints: one is the U.S. perspective, and the other is the perspective from regions outside the U.S. In the U.S., the mainstream view is that prediction markets are essentially a form of financial derivatives. Therefore, to make prediction markets legal and compliant, one must apply for a derivatives exchange license from the U.S. Commodity Futures Trading Commission.
However, in most regions outside the U.S., whether in Europe or Asia, prediction markets are generally considered gambling platforms. So, if gambling is legal in these regions, compliance with local laws requires applying for a gambling license; but if gambling is illegal in the area, engaging in prediction market activities may face serious legal consequences. Therefore, from a legal perspective, the essential difference between prediction markets and traditional gambling is not significant; at least, current regulatory agencies generally do not see much difference between them.
Specific Identification of Gambling Crimes and Operating a Casino Under Chinese Criminal Law
Host: Could you systematically break down the different risks faced by various roles in the entire prediction market ecosystem? For example, if project parties and initiators set up servers domestically, or if overseas projects target mainland users, what crimes might they violate? For instance, would it be the crime of organizing gambling, or could it also involve illegal business operations, etc.?
Jin Jianzhi: As we mentioned earlier, the regulatory approach outside the U.S. is relatively straightforward, generally considering prediction markets and gambling to be not much different. So, let's return to the legal provisions, particularly how gambling is defined under Chinese law. Chinese criminal law includes three crimes: the crime of gambling, the crime of operating a casino, and the crime of organizing or participating in overseas gambling.
First, the crime of gambling is defined in the criminal law as gathering people to gamble for profit or making gambling a profession, which can lead to a maximum sentence of three years in prison and fines. The specific manifestations of gathering people to gamble include: organizing gambling with three or more people, taking a cut of more than 5,000 yuan, or having total gambling funds exceeding 50,000 yuan, or having more than 20 participants, or organizing more than 10 Chinese citizens to gamble abroad and receiving kickbacks or referral fees, all of which constitute gathering people to gamble.
As for making gambling a profession, it refers to professional gamblers who rely entirely on gambling for income; in reality, cases convicted under "making gambling a profession" are relatively rare. The crime of operating a casino, on the other hand, is a form of organized crime. It involves providing a venue, space, and gambling tools for gambling with the intent to profit, setting gambling rules, and controlling the gambling process. If the circumstances are minor, the penalty is imprisonment for up to five years and fines; if the circumstances are serious, the penalty is imprisonment for five to ten years and fines.
Specifically, what constitutes operating a casino? For example, if you establish a gambling website and accept bets, or if you create a gambling website and provide it for others to organize gambling. Furthermore, if you act as an agent for a gambling website, accept bets, or participate in profit-sharing from a gambling website, this also falls under the behavior of operating a casino. When the gambling funds reach 300,000 yuan or the number of participants exceeds 120, it constitutes serious circumstances, with a maximum sentence of five to ten years in prison. In the internet age, these standards are actually quite easy to meet, as 300,000 yuan is not a large amount, and 120 participants can easily be reached, especially on online platforms.
Additionally, the 2021 amendment to the criminal law introduced the "crime of organizing or participating in overseas gambling," which has a higher threshold for conviction, requiring a significant amount or other serious circumstances. The law does not clearly define what constitutes a "significant amount," so there have been no cases applying this crime yet, and it is currently impossible to predict which case will become the first to apply this crime.
When we talk about the crime of gambling defined by criminal law, there is actually a protective legal interest, which is to protect the hardworking and prosperous lifestyle of Chinese people. Unlike the U.S. regulatory philosophy that encourages financial innovation, China's regulation tends to protect the basic living patterns of the public. Therefore, the possibility of prediction markets not being classified as gambling in China is almost zero.
Next, we need to discuss the legal risks faced by different participants in prediction markets. For example, project parties, if you operate a prediction market in mainland China, the situation becomes quite serious. If you establish a prediction market website and accept bets, then legally, this is equivalent to operating a casino, as your actions fully meet the definition of the crime of operating a casino. Common promotional methods include KOLs accepting advertising fees or sharing invitation codes for a certain platform. According to past legal opinions, if you accept instructions from a casino to attract gamblers, then you are an accomplice to the crime of operating a casino.
If you promote the platform through KOLs and receive advertising fees, you will basically be recognized as an accomplice to the crime of operating a casino, which is very clear. At the same time, if you only share an invitation code and the invitation code does not involve profit-making purposes, then this behavior falls into a gray area, which may displease regulatory authorities but does not constitute a crime.
Additionally, if you participate in other operational support, such as providing payment channels, there are also legal risks, and you could almost all be recognized as accomplices to the crime of operating a casino. As for ordinary players, if they merely participate and bet some money, they typically do not constitute a criminal offense but rather an illegal act. As long as you are not making a living from gambling and are not organizing gambling activities, you will not constitute the crime of gambling.
However, if your betting amount is relatively large, you may face administrative penalties. According to the Public Security Administration Punishment Law, the definition of a large betting amount is: when the betting amount exceeds a certain threshold, you may be subject to detention for up to 5 days or a fine of less than 500 yuan; if the circumstances are serious, you may face detention for 10 to 15 days or a fine ranging from 500 to 3000 yuan.
However, regarding the standards for large betting amounts, the Ministry of Public Security has not provided a clear definition. Different regions have different regulations; for example, Beijing considers 500 yuan to be a large betting amount, while Shanghai sets it at 100 yuan, Shenzhen at 500 yuan, and Sichuan at 1000 to 4000 yuan. Therefore, if you are playing a 15U prediction market in Shanghai, strictly speaking, you may face administrative detention.
Host: I understand, it depends on the attitude of the criminal law in different regions.
Jin Jianzhi: Yes, for ordinary players, it is basically unlikely to constitute a criminal offense, but it will involve administrative penalties. The administrative penalties mainly concern the issue of large betting amounts, which vary by location. However, from what I understand, on some prediction market platforms, many players bet relatively large amounts, ranging from at least 50U to 100U. If you are in Shenzhen and Beijing, you may not meet the standard for large betting amounts, but if you are in Shanghai, you may meet the conditions. If you are a project party or a KOL promoting the prediction market, according to current legal provisions, you are likely to be recognized as committing the crime of operating a casino.
Differences in Regulatory Logic and Territorial Jurisdiction in Hong Kong
Host: We are currently observing that Hong Kong is actively embracing virtual assets. So how does Hong Kong's regulatory attitude towards applications like prediction markets differ from that of the mainland? Is there a certain gray area?
Jin Jianzhi: Hong Kong has always had a gambling ordinance that prohibits gambling without approval or exemption. In other words, Hong Kong does allow for obtaining certain licenses, but these licenses are not open to everyone; they only provide a small window of opportunity. Hong Kong is essentially a common law jurisdiction, and like most common law regions, its criminal laws follow the principle of territorial jurisdiction, meaning that Hong Kong only has criminal jurisdiction if all or part of the criminal act occurs within its territory. This is completely different from the personal jurisdiction principle in the mainland.
For example, if you are a Hong Kong resident engaging in prediction market activities abroad that are not aimed at Hong Kong residents, then it does not constitute a crime in Hong Kong, which is a significant difference from mainland law. If you are a mainland resident, even if you conduct a prediction market abroad that does not target mainland users, according to mainland law, you would still face criminal risks. This difference reflects the distinctions between common law and civil law systems; there is no superiority or inferiority, just different legal paths chosen by different regions throughout history.
As for future changes in Hong Kong, the market size is relatively small. If a prediction market only targets Hong Kong, it is almost impossible from a practical operational perspective. Therefore, if there are project parties in Hong Kong particularly wanting to engage in prediction markets, they can completely rely on Hong Kong's principles of judicial jurisdiction to avoid Hong Kong's regulations and conduct business abroad without targeting Hong Kong users. In this way, they can operate compliantly abroad and avoid Hong Kong's regulatory oversight. Thus, regardless of whether Hong Kong relaxes relevant policies, the actual impact on Hong Kong project parties wanting to do business abroad will not be significant.
Analysis of the Reasons for the Scarcity of Enforcement Cases for Prediction Markets in the Mainland
Host: Returning to the mainland, there is an interesting phenomenon; it seems that there have not yet been large-scale and public enforcement cases targeting these purely prediction markets. What do you think is the reason for this regulatory lag? Is it due to the difficulty of technical evidence collection, or has its social harm not yet attracted enough attention?
Jin Jianzhi: Currently, it is indeed the case that there are relatively few enforcement cases for prediction markets in the mainland because these prediction markets are relatively new, and regulation has not kept pace with industry development. However, there are indeed cases related to prediction markets. For example, in 2021, the Supreme Court issued a guiding case regarding the crime of operating a casino. If anyone is interested, they can look up case number 146. At that time, a group of financial practitioners established a website called "Longhui Website," which primarily allowed users to predict foreign exchange price trends, where you could buy or sell, similar to events in some "poker games." These transactions appeared to be options trading, but the court clearly stated in the judgment that this binary options trading was essentially gambling, and the outcomes were no different from gambling; it merely disguised itself as options trading. Therefore, the relevant website was recognized as a gambling site.
From this judgment document, it can be seen that the court's legal judgment can basically be directly applied to current prediction markets. If prediction markets are targeted by regulatory authorities, they can essentially be recognized as "operating a casino." Therefore, although there are currently few enforcement cases in the mainland regarding prediction markets, from a legal perspective, once they attract regulatory attention, prediction markets may face the same legal classification as gambling.
Judgment on the Future Possibility of Compliant Prediction Markets
Host: How do you predict future regulations will evolve? Is there a possibility for compliant markets and compliant prediction markets to emerge?
Jin Jianzhi: In the U.S., there are already compliant prediction markets. The U.S. views these prediction markets as essentially a form of financial derivatives, whether event contracts or binary options, they are a type of financial derivative. If you want to operate compliantly, you only need to apply for a financial derivatives exchange license from the Commodity Futures Trading Commission. There is a prediction market called Kalshi that has obtained such a license, so it is fully compliant in the U.S. In fact, Polymarket even spent 100 million dollars to acquire a licensed exchange. It is believed that it may return to the U.S. market by the end of this year or next year.
However, the regulatory environment outside the U.S. is more complex, especially in the mainland, where there will definitely not be compliant prediction markets in the short term. To change the regulatory mindset and establish that prediction markets are not gambling but financial derivatives with social value is indeed very difficult. Although the concept of financial derivatives is understood by everyone, persuading regulatory authorities to accept that these financial derivatives have social value seems very challenging in the current social environment.
For example, if you want to predict the outcomes of sports events, we already have the Sports Lottery, and all the revenue from the Sports Lottery is used for public welfare. If you do not want to buy the Sports Lottery, you can predict match results on some video websites. For instance, during previous League of Legends competitions, you could participate in predictions on the Polymarket platform or guess match results on Bilibili. These types of products can already meet similar demands.
As for other types of event predictions, such as elections, weather, or other financial events, regulatory authorities may feel that these predictions lack social value. From their perspective, they are more inclined to protect the hardworking and prosperous lifestyle of the Chinese people, and there is a significant gap between this protection and the social value of prediction markets. Convincing regulatory authorities to abandon this mindset and accept a regulatory approach that encourages financial innovation like in the U.S. may be very difficult. Moreover, China is not the only country holding this view; most other countries outside the U.S. have similar regulatory philosophies. All countries believe that markets belong to state regulation, and the motivation for change is very small. Therefore, I believe that while U.S. regulations may gradually advance, and other countries' regulations may also loosen somewhat, fully accepting prediction markets still faces significant challenges.
Three Core Legal Risk Reminders and Summary
Host: Please provide our listeners with three core legal risk reminders.
Jin Jianzhi: Regarding prediction markets, I want to say that gambling itself is a very ancient and traditional form of entertainment; small bets can be enjoyable, and small gambling usually does not involve illegal activities or crimes.
The second point is that I know many people on Twitter really like Polymarket, considering it a new financial innovation, and I also recognize this business perception. I believe that business perceptions can be ahead of their time, but you must always respect the legal framework of the region you are in. If you really want to do something, you need to plan well and ensure you protect yourself.
The last point is that the regulation of the cryptocurrency industry is indeed relatively lagging, but this industry is developing very rapidly. Therefore, the longer you stay in the industry, the weaker your legal awareness may become. It is essential to maintain sensitivity to the law, especially by frequently following media with a high legal awareness, such as Wu Says, to stay timely aware of the legal bottom line.
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