The European Securities and Markets Authority (ESMA) has warned that major prediction platforms Polymarket and Kalshi lack the necessary authorization to operate in the European Union. In its September 10, 2026 risk report, ESMA declared that these platforms are "rife with insider trading" and expose retail investors to severe financial risks. While the US has approved some prediction contracts, European regulators are tightening restrictions, with France and Spain already blocking access to the platforms.
ESMA derivative classification rules
- ▪The European Securities and Markets Authority issued a statement on July 3, 2026, clarifying that event contracts with binary payouts tied to financial instruments qualify as derivatives under MiFID II
- ▪The European Securities and Markets Authority stated that event contracts qualifying as derivatives fall under the European Union's retail binary options ban, which has been in effect since 2018
- ▪The European Securities and Markets Authority stated that tokenized event contracts that do not qualify as MiFID II financial instruments might instead be regulated under the Markets in Crypto-Assets framework
MiFID II authorization requirements
- ▪The European Securities and Markets Authority warned in a September 10, 2026 risk report that major prediction markets, including Polymarket and Kalshi, lack the authorization required to serve European Union users
- ▪The European Securities and Markets Authority questioned why Polymarket and Kalshi do not restrict all European Union member states on their platforms, noting that both platforms only block some countries
- ▪The European Securities and Markets Authority stated that prediction platforms serving professional clients in the European Union must secure MiFID II authorization to operate legally
- ▪The European Securities and Markets Authority questioned whether Polymarket and Kalshi can effectively enforce bans on virtual private networks used by European users to conceal their locations
EU member state platform blocks
- ▪France's gambling regulator, the ANJ, ordered internet service providers to block access to Polymarket around July 17, 2026
- ▪Nine European gambling regulators issued a joint warning on June 19, 2026, targeting unlicensed prediction market platforms
- ▪Spain's gambling authority, the DGOJ, issued a precautionary block on the websites of Polymarket and Kalshi around May 26, 2026
Insider trading risks
- ▪The European Securities and Markets Authority stated that European market abuse rules against insider trading and misconduct only apply to prediction contracts that fall within the financial regulatory perimeter
- ▪United States soldier Gannon Ken Van Dyke was charged in April 2026 with placing Polymarket wagers on a mission to seize Venezuelan leader Nicolás Maduro using advanced knowledge of the raid
- ▪The European Securities and Markets Authority warned in its September 10, 2026 risk report that prediction markets are rife with insider trading
Market manipulation concerns
- ▪The European Securities and Markets Authority warned that the gamified structure, emotional dynamics, and social media promotion of prediction markets expose inexperienced retail investors to significant risks of financial loss and addictive behavior
- ▪The European Securities and Markets Authority stated that market manipulation and insider trading risks reach new levels on prediction platforms with limited identity verification, specifically naming Polymarket
US-EU regulatory divergence
- ▪Kalshi co-founder Luana Lopes Lara stated in July 2026 that the company was in talks with international regulators regarding future expansion in Europe
- ▪Polymarket announced on September 9, 2026, that it joined the Brussels-based trade association Blockchain for Europe to expand its presence and engage with European Union policymakers
- ▪The European Securities and Markets Authority's negative assessment of prediction markets contrasts with the approach of United States authorities, which have approved several financial products based on prediction-style contracts
Debatable claims
- ▪Financial prediction markets should be regulated as gambling
- ▪Decentralized prediction platforms should be regulated as traditional financial intermediaries
- ▪The European Union should ban retail access to prediction markets
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