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ESMA has made its decision. Polymarket and Kalshi are operating illegally in Europe — no authorization, no financial passport, and staggering volumes.
The European financial markets regulator has clearly stated that the two prediction market platforms do not have any valid authorization to sell their contracts in the European Union. For ESMA, these contracts are fully-fledged financial derivatives. Not games. Not sports bets. Financial instruments subject to the same rules as any structured product sold to retail investors. And without a license, it’s over — or it should be.
Twenty billion. In three months.
Soaring Volumes Since 2024
ESMA’s report highlights a surge in the sector directly linked to the 2024 U.S. presidential election. The figures from the fourth quarter of 2025 speak for themselves: Polymarket generated $12 billion in volume, Kalshi $8.8 billion. Total for the quarter: $20.8 billion. This isn’t a niche market. It’s a market that weighs as much as some regional European stock exchanges over an equivalent period.
And that’s precisely what has put ESMA on alert.
The problem is that regulation isn’t keeping up. Each contract offered on these platforms — whether it concerns an election, a sports event, an economic indicator, or a crypto market movement — can have a different legal status depending on the user’s country, the technology used, and the nature of the underlying asset. There is no single passport in Europe that covers all these forms of event contracts at once. So each contract must be evaluated individually before being marketed. That’s ESMA’s position, and it’s not budging.
No simple solution. No shortcut.
France, Spain, Switzerland: Blockades Multiply
France didn’t wait for the European report to act. In July 2026, Paris ordered a complete block of access to Polymarket on its territory. Spain had already imposed temporary restrictions on both platforms as early as May, citing the lack of gaming licenses. Similar measures followed in Switzerland, Poland, Belgium, and Portugal.
That’s a lot of countries. And that’s a lot of markets cut off.
For Polymarket and Kalshi, each national restriction represents a distinct problem to solve. Because European regulatory fragmentation is precisely that: no single rule, no central window. Each country has its own laws, its own licensing requirements, its own tolerance thresholds. The platforms may therefore need to adapt their offerings, business models, and controls country by country. It’s slow. It’s costly. And probably underestimated by the management teams who built these products for a borderless global market.
ESMA goes even further. It asks the platforms to strengthen their identity checks and transaction monitoring to comply with local specifics. Not just obtain a generic license — really adapt practices to the cultural and economic particularities of each national market. It’s a heavy requirement for platforms that operate on largely automated protocols.
The Crypto Risk in All This
ESMA doesn’t limit itself to prediction markets in its analysis. The regulator also points to bubble risks linked to massive credit-financed investments in artificial intelligence by major tech groups. The idea: if these investments turn sour, investors could liquidate their assets in a cascade — including their crypto positions. It’s an indirect alarm signal for the entire digital ecosystem, not just for Polymarket or Kalshi.
And that’s where the situation becomes broader than two unlicensed platforms.
European restrictions on prediction markets indirectly affect decentralized protocols operating on similar logics. Polymarket, in particular, runs on the Polygon blockchain. If regulators start treating on-chain contracts as financial derivatives — which ESMA seems ready to do — the implications for other decentralized finance protocols could be significant. Not clear yet how far it will go. But the direction is clear.
For Polymarket and Kalshi, the immediate challenge remains to prove that their operations comply with the regulations of each European country they serve. Without that, their expansion on the continent remains blocked. And with $20.8 billion in volume in a single quarter, that’s a lot of potential revenue left on the table.
ESMA continues to monitor the sector and is working on more precise guidelines — but for now, Kalshi and Polymarket are navigating a legal void that costs them entire markets.
Frequently Asked Questions
What volumes did Polymarket and Kalshi record in the fourth quarter of 2025?
Polymarket reached $12 billion in volume and Kalshi $8.8 billion, totaling $20.8 billion for that quarter alone.
Why is ESMA blocking Polymarket and Kalshi in Europe?
ESMA considers the contracts offered by these platforms to be financial derivatives, and neither Polymarket nor Kalshi has the required authorization to market them in the European Union.
Which European countries have already imposed restrictions on these platforms?
France blocked Polymarket in July 2026. Spain imposed temporary restrictions on both platforms in May. Switzerland, Poland, Belgium, and Portugal have taken similar measures.
Why It Matters
This decision by ESMA underscores the regulatory scrutiny facing decentralized finance and prediction markets in Europe, highlighting a broader trend towards stricter oversight in the crypto and fintech sectors. By categorizing these platforms as financial derivatives, ESMA indicates a shift in how such instruments will be treated under EU law, potentially impacting their operations and the future of similar platforms. This regulatory stance could also signal to other jurisdictions the necessity of compliance to avoid penalties, shaping the landscape for innovation and market participation in the region.
