The European Securities and Markets Authority has warned that platforms offering event contracts in the EU may require authorisation under existing financial services, crypto-asset, or gambling regulations. In its latest Trends, Risks and Vulnerabilities report, ESMA noted that major prediction market operators currently lack the necessary EU permissions for these activities.
ESMA clarified that no unified rulebook exists for prediction markets across Europe. Instead, firms must navigate three potential regulatory pathways depending on contract structure and underlying assets. Event contracts linked to financial or commodity underlyings covered by MiFID II would require relevant authorisation for any firm arranging or marketing them within the EU. Retail access faces additional hurdles since such contracts would typically be classified as derivatives and caught by national binary options bans.
Tokenised contracts falling outside financial instrument definitions may instead trigger MiCA requirements, while other products could be deemed gambling and need member state-specific licensing. ESMA questioned why platforms like Polymarket and Kalshi restrict users in only some EU jurisdictions rather than comprehensively blocking access given the regulatory uncertainty.
The European market remains substantially smaller than the United States, with quarterly volumes reaching twelve billion dollars on Polymarket and nearly nine billion on Kalshi during Q4 2025. Malta is exploring a dedicated framework, though ESMA emphasised any regime would require proper legislative foundation. Until then, platforms must conduct product-by-product classification assessments before marketing.
FXnCO Insight
Brokers considering prediction market offerings must recognise that regulatory ambiguity creates material compliance risk across multiple EU regimes simultaneously rather than providing operational flexibility.
Source: Finance Magnates