The European Securities and Markets Authority stated that prominent prediction market services do not possess the permits typically mandated to advertise and distribute event contracts within the European Union, while casting doubt on the adequacy of measures implemented by Polymarket and Kalshi to restrict participants across select member territories.
In a report issued on Thursday, the Paris-headquartered agency stated that event contracts can be subject to various regulatory frameworks based on their specific features. Certain instruments might be categorized as financial instruments under MiFID II, whereas distributed ledger technology contracts failing to meet that definition could fall under the Markets in Crypto-Assets regulation. Additional options might be governed under local gambling statutes.
“Consequently, the promotion and offering of event contracts inside the EU normally demands European clearance, which the leading prediction networks currently lack,” the authority pointed out.
Whenever agreements fulfill the criteria for financial instruments, they are typically grouped as derivatives and subject to local product intervention controls concerning binary options, which bar the marketing, rollout, and sale directed at retail traders, according to ESMA.
Both Polymarket and Kalshi block individuals situated in specific, though not all, EU nations from executing trades, based on findings from the watchdog. ESMA questioned why every single EU jurisdiction is omitted from their banned territories and noted that regional limitations fail to stop participants from reaching the applications via virtual private networks.
Insider trading concerns
ESMA likewise expressed worries regarding insider trading and market manipulation across prediction markets, specifically distributed ledger technology platforms such as Polymarket, where it argued that minimal identity verification and anonymous involvement can make illicit actions more difficult to spot.
Earlier this year, Kalshi deployed screening utilities alongside a whistleblower function, whereas Polymarket broadened its prohibitions targeting insider trading, spoofing, wash trading, and front-running. Kalshi additionally permanently barred former U.S. Rep. George Santos following his trading activity on a contract linked to his presence at the State of the Union address, which resulted in a penalty exceeding $71,000.
ESMA noted that such exchange initiatives designed to mitigate irregular trading tend to be reactionary, and emphasized that prediction networks additionally encounter vulnerabilities concerning contract settlement, informational inputs, and smart contract execution.
Nonetheless, the agency mentioned that prediction venues still maintain a relatively modest footprint throughout the European Union, even as Eurex, Euronext, CME Group, Cboe, ICE, and Nasdaq demonstrate rising curiosity regarding prediction-format offerings and associated systems.
Originally published at https://www.theblock.co/news/regulation/2026-09-11-esma-says-major-prediction-platforms-lack-eu-authorization-questions-polymarket-and-kalshis-partial-geo-blocks-414239.
