Prediction markets are surging in popularity as cryptocurrency-based gambling platforms offering diverse gameplay and attractive odds, observers have said, warning against the risks of reneged payouts after the Hong Kong government halted plans for legalised basketball betting.

They also warned on Tuesday that Hong Kong residents who participate in these platforms, which use cryptocurrency for transactions, could be breaking gambling laws while falling into unregulated contract disputes with the events they bet on.

On Monday, authorities announced the suspension of plans for legalised basketball betting originally set to be launched in September, citing the rapid rise of prediction markets as a significant risk in attracting public…