EU Regulator Says Major Prediction Markets Operate Without Proper Authorization

The European Securities and Markets Authority has stated that the largest prediction market platforms lack the necessary authorization to legally market and sell event contracts within the European Union. In a newly published report, the regulator noted that such contracts can fall under different regulatory frameworks depending on their structure, potentially qualifying as financial instruments, crypto assets, or gambling products under national law.

According to ESMA, marketing and selling these contracts generally requires EU authorization that platforms like Polymarket and Kalshi currently do not hold. Where contracts are classified as financial derivatives, they would typically fall under existing restrictions that prohibit marketing binary-option-style products to retail investors.

The regulator also pointed out that both platforms block users in some EU countries but not others, questioning why restrictions are not applied uniformly across all member states. ESMA further noted that geographic blocking measures can be easily bypassed using VPN services.

Insider Trading Remains a Key Concern

ESMA raised additional concerns about insider trading and market manipulation, particularly on blockchain-based platforms where limited identity verification makes suspicious activity harder to detect. Both platforms have taken steps to address these issues, including new screening tools, whistleblower programs, and expanded rules against manipulative trading practices. Kalshi previously banned a former U.S. congressman after he was found trading a contract linked to his own public attendance.

Despite these concerns, the regulator acknowledged that prediction markets remain relatively small within the EU, even as major exchanges show growing interest in developing similar products.