Core Summary
According to CoinDesk, the European Securities and Markets Authority (ESMA) has formally questioned the EU operating status of prediction market platforms Polymarket and Kalshi, warning of potential authorization gaps under MiFID II and the Markets in Crypto-Assets Regulation (MiCA). The development marks the first time the EU’s top financial regulator has raised systemic concerns about prediction market compliance in Europe, and could lay the groundwork for stricter enforcement or market access restrictions. The news introduces new uncertainty around prediction market expansion in the EU.
Event Details
Core of the Regulatory Inquiry: ESMA’s inquiry focuses on two core questions: first, whether Polymarket and Kalshi’s event contracts in the EU qualify as “financial instruments” under MiFID II; and second, whether the platforms hold appropriate operating authorizations in any EU member state. The regulator made clear that if event contracts are deemed financial instruments, the platforms must obtain corresponding authorization in an EU member state before offering services.
Current Status of Polymarket and Kalshi: Polymarket, one of the largest decentralized prediction market platforms globally, has long operated across multiple jurisdictions and is pursuing a compliance path through Polymarket US. Kalshi is the first regulated prediction market platform in the United States, overseen by the CFTC. However, the EU compliance status of both platforms remains ambiguous, with some EU users accessing the services via VPN technology—a pattern that has drawn close regulatory attention.
Complexity of EU Regulatory Framework: EU regulation of prediction markets sits at the intersection of multiple frameworks. Under MiFID II, event contracts could be classified as derivatives or financial instruments; under MiCA, crypto-linked event contracts may fall under specific crypto-asset rules; and individual EU member states maintain widely varying stances on gambling and prediction market oversight. The overlapping frameworks make the EU compliance path for prediction market platforms especially complex.
Potential Impact of Regulatory Action: While ESMA’s inquiry has not yet translated into formal enforcement, its potential impact should not be underestimated. If the regulator ultimately determines that Polymarket and Kalshi have authorization gaps, it could require both platforms to obtain authorization in an EU member state, or directly limit their EU service scope. The development could also prompt other EU regulators to launch broader compliance reviews of the prediction market sector.
Expansion Pressure on the Sector: The prediction market sector has grown rapidly, with Polymarket, Kalshi, and other leading platforms seeing sustained increases in trading volume and user base. Multiple industry research firms forecast that global prediction market trading volume will surpass $100 billion by the end of 2026. However, the rapid expansion has also surfaced regulatory lag, compliance ambiguity, and user protection gaps. ESMA’s inquiry highlights the need for the industry to find a balance between expansion and compliance.
Industry Reaction: Reactions within the prediction market sector have diverged. Some platforms said they will proactively engage with ESMA and seek authorization in the EU; others have expressed concern that overly strict regulation could stifle industry innovation. Industry voices stressed the need for a new balance among regulatory dialogue, product innovation, and user protection.
Panoramic Perspective
ESMA’s inquiry into Polymarket and Kalshi is one of the most significant regulatory challenges facing the prediction market sector in recent years, with implications spanning compliance, global expansion, and regulatory coordination.
On compliance, the inquiry highlights the fundamental challenge facing prediction markets: as a new financial form, event contracts straddle the boundaries of financial instruments, information markets, and betting products, and cannot be easily slotted into traditional regulatory categories. While EU frameworks such as MiFID II and MiCA set clear rules for derivatives and crypto assets, the legal classification of event contracts remains ambiguous. Prediction market platforms will need to adapt product design, marketing, and user onboarding to meet EU requirements.
On global expansion, EU regulatory developments could significantly reshape the global expansion strategies of prediction market platforms. With the US market constrained by scale and regulatory tolerance, leading platforms have actively sought opportunities in European and Asian markets. But ESMA’s inquiry shows that the global expansion path will face increasingly complex regulatory environments, and “enter first, comply later” strategies carry growing legal risk.
On regulatory coordination, the EU move could trigger global regulatory coordination on prediction markets. MiCA, as the world’s first comprehensive crypto-asset regulatory framework, has already shaped global crypto regulation. ESMA’s move on prediction markets could prompt other major jurisdictions to revisit their frameworks for event contracts, accelerating the formation of global regulatory standards.
On user protection, the rapid expansion of prediction market platforms has surfaced user protection challenges. Event contracts typically involve betting on the outcome of future events, exposing users to information asymmetry, market manipulation, and conflicts of interest. ESMA’s compliance review reflects, in part, heightened attention to user protection. Going forward, prediction market platforms will need systematic improvements in product transparency, user suitability, and market manipulation safeguards.
On industry innovation, overly strict regulation could dampen the innovation vitality of prediction markets. The core value of prediction markets lies in aggregating dispersed information and discovering true probabilities through market mechanisms. Overly strict regulation could limit their application potential in political elections, business decisions, and risk management. Finding the balance between regulatory compliance and industry innovation is the central challenge facing the sector.
On geopolitics, the global expansion of prediction market platforms also carries a geopolitical flavor. Platforms like Polymarket have repeatedly triggered controversy over event contracts involving sensitive political events, and some EU regulators have grown concerned about the potential impact on European political stability. This concern may drive EU regulators toward a more cautious stance.
Multi-Perspective Comparison
EU regulators: A stricter posture. ESMA made clear in the inquiry that event contracts offered in the EU must comply with relevant regulatory frameworks. The regulator emphasized that the principle of obtaining authorization in an EU member state for the marketing of financial instruments is non-negotiable. EU officials privately noted that the rapid growth of prediction market platforms requires corresponding regulatory follow-up to ensure market fairness, user protection, and financial stability.
Prediction market platforms: Diverging responses. Polymarket and Kalshi have not yet issued formal responses to the inquiry, but the industry has shown a split. Some platforms said they will actively engage with the regulator and seek authorization in the EU; others worry that the regulatory direction could impose substantive limits on industry expansion. Platform leaders said they are closely monitoring the inquiry’s progress and will adjust EU strategies as necessary.
Industry analysts: Cautiously optimistic. Multiple research firms believe that EU regulatory developments may pressure the sector’s EU expansion in the short term, but could promote standardization in the long term. Clearer regulatory frameworks could in fact, help leading platforms consolidate market positions and earn regulatory recognition. Industry voices stressed the need for a new balance among regulatory dialogue, product innovation, and user protection.
EU users and market participants: Divided opinions. Users supportive of prediction market development argue that prediction markets are effective tools for aggregating information and discovering prices, and that overregulation will limit European participation in new financial forms. More cautious users worry that prediction market products involve information asymmetry, market manipulation, and conflicts of interest, requiring stricter regulation to protect users. Members of the European Parliament said they are closely monitoring the regulatory direction and will push for further legislative clarity where necessary.
编辑：GoodInfo全球资讯组