Polymarket and Kalshi have not obtained the authorizations typically required to sell event-outcome contracts in the European Union, the European Securities and Markets Authority (ESMA) said.
Both platforms block trading only for users from certain EU countries. The regulator questioned this approach:
“It is unclear why not all EU member states are included on the list of restricted jurisdictions.”
Polymarket restricts trading for users from Germany, France, Italy, and the Netherlands, among others. In the Kalshi member agreement, the EU countries where trading is prohibited include Belgium, Bulgaria, Hungary, Ireland, Italy, Poland, Portugal, and France.
The absence of a country on Kalshi’s list does not mean its residents can trade freely: the company requires compliance with local law. Trading restrictions also do not automatically extend to other platform features.
ESMA also questioned how effective these restrictions are in practice. Although Polymarket bans circumventing blocks via VPN, the existence of such a rule does not guarantee compliance.
What rules apply in Europe
The applicable requirements depend on how the contract is structured and the event it references. In a July 3 public statement, ESMA outlined three possible regulatory regimes:
- MiFID II — rules for financial instruments;
- MiCA — rules for crypto-assets if the contract is structured as a token and does not qualify as a financial instrument;
- national gambling law — if the contract is recognized as a bet. It can apply alongside financial regulation.
A fixed payout for a correct prediction does not by itself make a contract a financial instrument. What matters is the underlying asset or indicator and whether such a contract type is covered by MiFID II.
If a contract is deemed a financial instrument and falls under restrictions for binary options, it cannot be advertised or sold to retail clients. These bans are enforced at the member-state level; they replaced ESMA’s temporary 2018 measures.
Labeling a product an “event contract” does not circumvent the restrictions — regulators assess the product’s structure. Paying interest or rewards on deposited funds also does not change its binary nature: the contract’s payout depends on whether the event occurred or not.
Serving only professional clients also requires authorization under MiFID II if the platform offers financial instruments.
How EU countries restricted access to the platforms
Authorities in Spain and France have already taken action against prediction markets under gambling laws.
In May, the Spanish regulator opened proceedings against Polymarket and Kalshi over alleged operations without the required authorization. It ordered the sites to be blocked pending the outcome.
The agency reminded that licensed operators must verify customers’ identities and prevent minors and people barred from gambling from playing.
In France, Polymarket’s own restrictions did not cut off access. According to the National Gambling Authority (ANJ), users bypassed the block, and the site saw about 205,000 unique visitors from the country in June. On July 16, the agency ordered internet providers to block Polymarket.
Both companies remain interested in the European market. According to the Financial Times, Kalshi co-founder Luana Lopes Lara spoke in July about talks with foreign regulators and plans to expand in Europe.
On September 9, Polymarket announced it had joined the industry association Blockchain for Europe. The company’s general counsel, Neil Kumar, said it was ready to engage early and openly with European lawmakers.
Risks highlighted by ESMA
Beyond licensing, ESMA reviewed risks for market participants. On blockchain platforms like Polymarket, limited identity checks and the ability to use multiple accounts make detecting insider trading and manipulation more difficult.
The report mentioned the case of a U.S. servicemember Gannon Ken Van Dyke. Prosecutors say he used non-public information about an operation to capture Nicolas Maduro and made more than $400,000 on Polymarket.
The platform said it detected suspicious trading, notified the U.S. Department of Justice, and cooperated with the investigation. The servicemember has pleaded not guilty.
Another risk is tampering with the data that determine outcomes. In April, suspicions of manipulation centered on two Polymarket accounts that earned $37,000 on bets tied to temperatures at Paris Charles de Gaulle Airport. The payouts were linked to anomalous readings from weather sensors.
The meteorological service Météo-France filed a police complaint. According to ANJ, on May 4 the Paris prosecutor’s office opened an investigation into suspected interference with the sensors.
There are also issues with determining outcomes. ESMA pointed to ambiguous contract terms, non-transparent resolution procedures, and payout delays — all of which create a risk of losses for users.
At the same time, the regulator acknowledged the value of prediction markets: their prices help track participants’ expectations about political, economic, and social events.
In August, the New York City Council launched a review of Polymarket and Kalshi’s marketing. Lawmakers were concerned about allegedly misleading advertising, undisclosed influencer payments, and promoting betting among youth.
