The European Securities and Markets Authority said the largest prediction-market platforms do not currently hold the EU permissions that may be required to market or sell event contracts inside the bloc. The finding appears in ESMA's Trends, Risks and Vulnerabilities report released on September 11, 2026.
The three regulatory routes
Europe has no single rulebook for prediction markets. Instead, ESMA said an event contract may fall under one of three existing frameworks depending on how the product is structured and what it tracks. If a contract is tied to a financial or commodity underlying covered by MiFID II, firms arranging, marketing or selling it in the EU would need the relevant MiFID II authorisation. Retail access would face an additional barrier: financial-instrument event contracts would generally be treated as derivatives and fall under national measures restricting binary options.
Contracts that are not financial instruments but are tokenised may instead fall under the Markets in Crypto-Assets Regulation (MiCA). Any remaining products could be treated as bets and require permission under the gambling laws of individual member states. ESMA stressed that not every yes-or-no contract meets the threshold for financial-instrument classification, but platforms face a product-by-product determination before they can legally operate.
Partial geo-blocks raise questions
Polymarket and Kalshi both restrict users in some EU member states, but not all of them. ESMA questioned why other member states are not included in those restrictions, given the risk of providing unauthorised services. The regulator also cast doubt on the effectiveness of VPN bans, suggesting that geo-blocking alone may not be a sufficient compliance measure.
The finding matters because Europe's fragmented approach means prediction-market platforms could be subject to multiple overlapping regimes simultaneously. A single contract that tracks a financial index could trigger MiFID II requirements, while a tokenised version of the same contract could also fall under MiCA. Without a harmonised framework, platforms must navigate a patchwork of national laws that vary from member state to member state.
Regional gap and Malta's pilot
Prediction markets remain far smaller in Europe than in the United States. ESMA's report noted that global quarterly volume reached approximately $12 billion on Polymarket and $8.8 billion on Kalshi in the fourth quarter of 2025. The regulator suggested that Europe's regulatory restrictions may partly explain the regional difference in adoption.
Malta became the first EU member state to publicly explore a dedicated prediction-market framework in March 2026, but ESMA cautioned that any such development would still need an appropriate legislative structure. Until a harmonised approach emerges, prediction-market operators face the prospect of seeking multiple national authorisations or limiting their EU presence to jurisdictions where activity is clearly permitted.
What comes next
The report does not require platforms to take immediate action, but it signals that EU regulators are closely watching the prediction-market space. Platforms that continue to market event contracts in the EU without authorisation face the risk of enforcement action under whichever regime their products fall under. For now, the regulatory classification of each product remains a matter of legal interpretation that platforms must resolve on a case-by-case basis.
Sources
1. European Securities and Markets Authority, Trends, Risks and Vulnerabilities report, September 11, 2026 2. Finance Magnates, "Event Contract Marketing in Europe May Require EU Authorisation, ESMA Says," September 11, 2026 — financemagnates.com 3. Cointelegraph, "ESMA warns growing crypto ties could amplify risks to traditional finance" — cointelegraph.com
