ESMA questions prediction platforms' EU market access controls

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ESMA on prediction market EU access

Highlights

ESMA reports leading prediction market platforms lack required EU authorization, risking breaching MiFID II, MiCA, or national gambling laws for event contracts.
ESMA criticizes geographic user restrictions by Polymarket and Kalshi as incomplete, noting VPNs can bypass controls and questioning inconsistent coverage across EU member states.
ESMA highlights concerns over insider trading, market manipulation, and contract execution on DLT-based platforms, stating existing platform controls are reactive and market scale remains limited in the EU.

Regulatory concerns over authorization and access

As reported by The Block, citing the European Securities and Markets Authority, event contracts marketed in the EU can fall under different regulatory regimes depending on their structure, with some qualifying as financial instruments under MiFID II, others falling under MiCA, and some treated as gambling products under national law.

The Paris-based regulator says the marketing and sale of event contracts in the EU generally requires EU authorization, which the largest prediction market platforms do not currently hold. Where the contracts qualify as financial instruments, they would generally be treated as derivatives and fall under national product intervention measures on binary options, which prohibit their marketing, distribution, and sale to retail investors.

ESMA also questions the restrictions used by Polymarket and Kalshi to block users in some, but not all, EU member states. The regulator says it is unclear why all EU countries are not covered by those restricted-jurisdiction policies, and adds that geographic controls do not stop users from reaching the platforms through VPNs.

Trading surveillance and market impact

The regulator raises additional concerns over insider trading and market manipulation, particularly on DLT-based platforms such as Polymarket, where limited identity verification and pseudonymous participation can make suspicious activity harder to detect.

Earlier this year, Kalshi introduced screening tools and a whistleblower feature, while Polymarket expanded rules against insider trading, spoofing, wash trading, and front-running. Kalshi also permanently banned former U.S. Rep. George Santos after he traded a contract linked to his attendance at the State of the Union and was ordered to pay a fine of more than $71,000.

ESMA says these platform measures are largely reactive and that prediction markets also face risks tied to contract resolution, data sources, and smart-contract execution. Even so, it adds that the sector remains relatively limited in scale within the EU, despite growing interest in prediction-style products and related infrastructure from Eurex, Euronext, CME Group, Cboe, ICE, and Nasdaq.

Our earlier coverage of the National Stock Exchange of India’s clarification letters explained how the exchange flags unusual share price swings or volume spikes and asks listed companies to confirm facts and disclose any price-sensitive information. It also noted that some responses are published through NSE corporate filings while others remain pending, which can add uncertainty and amplify short-term volatility for investors.

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