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Europe’s prediction market platforms are in murky legal territory. ESMA dropped a warning in its latest Trends, Risks and Vulnerabilities report: platforms marketing or selling event contracts across the EU probably need formal authorization they don’t currently have.
The regulator didn’t name one single pathway. It laid out three, and none of them are simple. If an event contract ties to a financial or commodity underlying already covered by MiFID II, it likely qualifies as a financial instrument — and that means any platform selling or marketing it inside the EU needs MiFID II authorization. Full stop. That applies to both retail and professional clients, though retail access gets even tighter because several EU member states have layered on national restrictions for derivatives, binary options especially. So a platform that thinks it’s operating in a gray zone might actually be in clear violation in certain markets without realizing it.
Not every contract falls under MiFID II, though.
Tokenized contracts that don’t meet the financial instrument definition could land under MiCA — the Markets in Crypto-Assets Regulation — which has its own authorization requirements and its own compliance burden. And some contracts might just be treated as bets, which kicks them into the world of national gambling laws. The problem there is that gambling regulation isn’t harmonized across the EU. It’s a country-by-country patchwork, and what’s legal in one member state can be prohibited in the next.
Polymarket and Kalshi: Patchy Access, Big Volumes
ESMA’s report called out Polymarket and Kalshi by name. Both platforms restrict access in some EU countries — but not all of them. That inconsistency is basically the core of ESMA’s concern. If you’re blocking users in France but not in Germany, and the legal basis for that distinction isn’t solid, you might be running unauthorized services in the markets where you’re still operating. The regulator sees that as a potential breach of MiFID II, MiCA, or gambling rules depending on how the contracts get classified.
The volume numbers make clear why this matters. Polymarket posted roughly $12 billion in quarterly trading volume in late 2025. Kalshi wasn’t far behind at $8.8 billion for the same period. Those are US-driven figures, and the gap between American and European activity is pretty stark. Europe hasn’t come close to those numbers, and ESMA’s report seems to think the regulatory fog is part of the reason why. Platforms can’t easily scale into markets where they can’t figure out which rulebook applies to them.
It’s worth noting that prediction markets have grown fast globally over the past few years, fueled partly by high-profile political events and sports outcomes that drew in retail participants who’d never touched a derivatives product before. That growth has caught regulators’ attention everywhere — not just in Europe.
Malta Moves First, But It’s Early Days
One EU member state is actually trying to get ahead of this. Malta started exploring a dedicated prediction-market regulatory framework in March 2026, making it the first in the bloc to take that step. ESMA acknowledged the move but didn’t exactly cheer it on without caveats. The regulator was clear: any national framework would still need a well-defined legislative structure behind it. You can’t just announce a framework and call it solved.
And Malta is one country. The EU has 27 member states, and until there’s some kind of harmonized approach — or at least clearer guidance at the EU level — platforms are stuck doing a product-by-product, country-by-country legal assessment before they can market anything. That’s an expensive and slow way to operate.
ESMA didn’t offer a timeline for when clearer rules might come. No details on that front. What the regulator did was essentially put platforms on notice: the current situation, where some EU users can access these products and others can’t, based on what seem like arbitrary geographic cutoffs, isn’t going to fly indefinitely.
For platforms eyeing European expansion, the message is probably to slow down and get legal clarity before pushing into new member states. For users in EU countries where access is currently available, it’s unclear whether that access will stay open as regulatory scrutiny tightens.
Kalshi and Polymarket between them handled more than $20 billion in quarterly volume in late 2025.
Frequently Asked Questions
What does ESMA say platforms need to operate prediction markets in the EU?
ESMA says platforms marketing or selling event contracts in the EU likely need authorization under MiFID II, MiCA, or national gambling laws, depending on how each contract is classified.
Which platforms did ESMA specifically flag in its report?
ESMA named Polymarket and Kalshi, noting both platforms restrict access in some EU countries but not others, raising concerns about potential unauthorized services across the bloc.
Why It Matters
The ESMA's warning highlights the regulatory uncertainty surrounding prediction markets in Europe, which could stifle innovation and growth in a sector that has the potential to provide unique insights and hedging opportunities. As platforms like Polymarket and Kalshi navigate these complex legal requirements, their ability to operate may be compromised, impacting liquidity and participation in these markets. This situation underscores the broader challenge of reconciling emerging technologies with existing regulatory frameworks, a theme that resonates across the cryptocurrency and fintech landscape.
