The European Securities and Markets Authority has said prediction market platforms Polymarket and Kalshi do not appear to have the authorization generally needed to market and sell event contracts to users across the European Union. In ESMA’s view, offering those products in the bloc typically requires an EU authorization that the two platforms reportedly do not hold.

The regulator also raised broader compliance questions around how such services are classified under EU law and whether they can reliably stop access by users who disguise their location through tools such as VPNs. Its comments point to a fragmented legal picture in which the same type of contract may be treated under securities, crypto-asset or gambling rules depending on its structure.

Three possible legal frameworks

ESMA said event contracts can fall into three different regulatory buckets in the EU. If a contract is treated as a financial instrument, it may be considered a binary option, an area already subject to EU restrictions. That route would place the product within the bloc’s financial-market rulebook.

If a contract is blockchain-based but does not qualify as a financial instrument, ESMA indicated it could instead fall under the Markets in Crypto-Assets framework, known as MiCA. Where a product fits neither category, national gambling laws may apply, leaving oversight to individual member states rather than a single EU-wide regime.

Authorization and access concerns

A central point in ESMA’s warning is that selling these contracts across the EU generally requires authorization within the bloc. According to the regulator, Polymarket and Kalshi do not hold that authorization, which means their ability to lawfully offer event contracts to EU users is in doubt.

ESMA also questioned the practical effectiveness of geographic restrictions. Even where a platform attempts to block users from certain jurisdictions, the authority noted the difficulty of preventing access when people can conceal their location with virtual private networks. That concern goes to enforcement as much as formal licensing, because a platform may state that a market is unavailable in Europe while still struggling to keep EU-based users out.

Insider-trading rules may not always apply

The authority highlighted what it sees as a gap in insider-trading enforcement for prediction contracts. Under the current framework, insider-trading rules apply only when a contract is classified as a financial instrument. If a product falls outside that category, the usual market-abuse protections may not attach in the same way.

That distinction matters because event contracts can be linked to real-world outcomes that may be vulnerable to information asymmetry or manipulation concerns. ESMA’s comments do not state that every such contract is unlawful, but they underscore that legal treatment depends heavily on classification and that safeguards may vary sharply from one regime to another.

Restrictions already seen in some countries

The article notes that several countries have already blocked or restricted these platforms. Those steps have been tied to concerns including insider trading and market manipulation, reflecting unease about how event-based contracts should be supervised when they sit between multiple legal categories.

For now, ESMA’s position clarifies the regulator’s view that cross-border access to these products in the EU cannot be assumed. The next confirmed issue is whether specific contracts are judged to be financial instruments, crypto-assets under MiCA, or matters for national gambling law, since that classification determines both the applicable rules and the available enforcement tools.

Source: Cryptopolitan