Prediction markets, the platforms where people bet on real-world events like elections or interest-rate decisions, have just run into trouble in Europe. A financial watchdog now says their core product may have been illegal to sell here for years. Their World Cup-fuelled expansion could stall before it truly begins.
Prediction markets like Kalshi and Polymarket let people bet on real-world outcomes by buying what the platforms call “event contracts”: simple yes-or-no wagers that pay a fixed amount if you are right and nothing if you are wrong. The sector has exploded globally, including in Europe, despite already strict restrictions. Now, Europe’s securities watchdog says the whole product may already be illegal to sell here, and has been for years.
That is the shock for prediction markets. Their entire case was that they offered a financial product, not a gambling service, given Europe’s strict gambling regulation. Now, either way they present it, a European regulation stands in the way.
A question of definition
The warning came from the European Securities and Markets Authority (ESMA) on 3 July. Kalshi’s case has always been that it is a regulated financial exchange, not a bookmaker. That distinction decides which rulebook applies. Under EU law, whether a contract is a financial instrument depends on the thing it is priced on. The rulebook lists interest rates, currencies, commodity prices, emission allowances, and contracts referencing inflation.
Kalshi sells exactly these: bets on rate decisions, on inflation, on commodity prices. And because such a contract pays a fixed sum if the event happens and nothing if it does not, it is a binary option, the exact thing banned from sale to EU retail investors since 2018. The ban came after the product wiped out the savings of thousands of small traders.
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Bets on elections and football matches, however, fall outside that definition. They are not financial instruments, but instead fall under national gambling law.
The face of football?
The decision came as prediction markets were making their move into Europe. ADI Predictstreet, a Kalshi and FIFA World Cup partner, was planning its much-anticipated release in Europe after a favourable regulatory approval from Gibraltar that would allow it to move beyond sports.
“While sport was the ideal place to introduce our prediction market platform to a global audience, our ambition has always been to build one where people can participate in forecasting the events that shape our world – from sport and entertainment to culture, weather and beyond,” said Dimitrios Psarrakis, CEO of ADI Predictstreet.
ADI Predictstreet has been seen by anyone watching the World Cup. Through its partnership with FIFA, its ads have been everywhere, as trading volumes hit records. Its partner Kalshi now handles roughly 90 per cent of regulated US prediction-market trading.
An unknown market
Prediction markets in Europe are an unknown quantity. Technically, they are geoblocked: the platforms detect a user’s location by IP address and refuse service. Sometimes this happens voluntarily under regulatory pressure. Polymarket did so in France, for instance, after contact from the French authorities. Other times, a regulator orders it outright, as in Spain, where internet providers were told to block both Polymarket and Kalshi.
But location filtering is not absolute. It can be circumvented with a VPN, and there is no hard data on how often that happens.
Open the European market pages on the sites, however, and there is heavy trading on European politics and sport. Polymarket’s own “EU Election” page groups markets loosely, and includes bets on the next French presidential election showing around $105m in cumulative trading, with the far right’s Jordan Bardella leading near 25 per cent. Almost everything else trades below $200,000. Analysts also estimate that a chunk of prediction-market volume is “wash trading,” where traders bid against themselves to inflate the figures.
The regulation
The first approach by European regulators was gambling law: national regulators across the bloc ruled these platforms were unlicensed betting and ordered them blocked. The second, as of this month, is financial law: ESMA’s binary-options warning.
Before ESMA weighed in, the response was national, with France’s National Gaming Authority (ANJ) leading the way. The ANJ told EU Perspectives that it applies a four-part test. An activity is gambling, it says, when there is “an offer made to the public,” one that “creates an expectation of winning,” where that expectation is “due, even partially, to chance,” and which requires “a financial sacrifice” from participants. Polymarket met all four. The regulator contacted the platform’s operator, Adventure One QSS, at the end of October 2024.
The gaming offerings were likely, under French law, to constitute unauthorised gambling.
— Elsa Trochet-Macé, communications director, National Gaming Authority (ANJ)
“The ANJ’s action against the operator of the Polymarket website was based not on the fact that the financial transactions conducted on the site were carried out using cryptocurrencies,” said Elsa Trochet-Macé, the regulator’s communications director. “But on the broader circumstance that the gaming offerings were likely, under French law, to constitute unauthorised gambling,” she continued. Polymarket’s response was to geoblock France.
Following suit
In May, Spain’s gambling regulator, the Directorate General for the Regulation of Gambling (DGOJ), named both platforms, opened formal proceedings, and ordered internet providers to block them, with a final decision expected within three to four months. It was the first time a European regulator had named Kalshi, not just Polymarket.
In June, nine gambling regulators, Belgium, France, Germany, Italy, the Netherlands, Poland, Portugal, Spain and Switzerland, jointly warned the public against betting on the tournament through unlicensed platforms, citing risks of consumer harm, manipulation and fraud.
In Germany, the gambling authority opened an investigation into ADI Predictstreet, which has since cut off German users. Recent reporting indicates Kalshi itself now bars German residents from opening accounts. The idea that Kalshi, as a “regulated exchange,” could reach Europeans where Polymarket could not is, on current evidence, finished.
Europe has closed the lawful avenue for these markets, but geoblocking can be easily circumvented. Moreover, the bans target the platform, not the trader: it is now unlawful to market or sell these contracts to Europeans, but anyone who routes around a block is trading on an unlicensed venue with no protection and no recourse.
