Polymarket is stepping up its lobbying across Europe as it plans to convince financial regulators to treat prediction-market contracts as financial instruments rather than gambling. The company is in talks with policymakers in Brussels, the UK and major European capitals. It wants event contracts to fall under financial services rules such as MiFID II. The push faces a new obstacle after the European Securities and Markets Authority (ESMA) said on September 10 that prediction platforms, including Polymarket and Kalshi lack the authorization needed to sell event contracts in the EU. The dispute could decide whether prediction markets develop into a regulated part of European finance or remain subject to gambling rules and enforcement rules.

Why Polymarket Wants MiFID II Rules Instead Of Gambling Laws

Polymarket’s key objective is to avoid having its event contracts classified as gambling or betting products under national laws. The organization seeks a framework in which qualifying contracts can be treated as financial derivatives under the EU Market in Financial Instruments Directive (MiFID II), while crypto-based versions could potentially be categorized under the Markets in Crypto Assets (MiCA) framework. ESMA has said that event contracts offered by prediction platforms can constitute financial tools or derivatives in many conditions.

If that interpretation applies, platforms offering them in the EU would generally need appropriate MiFID II authorization. Crypto-based contracts would face a different regulatory channel depending on their structure. The categorization matters because financial services authorization could provide Polymarket with a better framework for operating across EU Member States. Rather than dealing with separate gambling rules, licenses, and constraints in individual countries, the company seeks a more unified regulatory structure. 

Which European Regulators Have Moved Against Polymarket?

Several European regulators have already taken steps to restrict or block prediction market activity. Spain, France, Portugal and Hungary have blocked or banned the platform, while UK, German and Italian regulators say local gambling licences would be needed are among the countries identified as having moved against Polymarket’s activity. This treats them as illegal gambling or illegal financial services. Polymarket has therefore been engaging with ESMA, the European Commission, and the UK Financial Conduct Authority as it seeks appropriate licenses and regulatory clarity.

Ongoing efforts include calls for guidance establishing when event contracts would qualify as MiFID II derivatives. It also looks for a path towards authorization that would allow regulated marketing and sales across Member States.

Why ESMA Is Wary Of Polymarket And Kalshi In The EU

ESMA’s concern extends beyond the question of whether prediction contracts should be governed as financial tools or gambling products. The regulator has also emphasized investor safety and market-integrity risks associated with rapidly expanding prediction markets. Insider trading and market manipulation are concerns because contracts can be tied to political, economic, corporate and other real-world events. ESMA also questioned whether current geographic constraints imposed by platforms such as Polymarket and Kalshi are sufficient to avoid unlawful access.

The regulator has pointed to the ability of users to bypass geo-blocking measures through VPNs. That creates a governance challenge because simply restricting access from certain jurisdictions does not necessarily stop users from accessing event contracts. 

Another issue is the chance that some event contracts could fall under current EU constraints on binary options. Those rules can prohibit the marketing and distribution of certain products to retail stakeholders, potentially creating another barrier for prediction-market platforms even if they choose a financial-services categorization. For Polymarket, the European campaign is therefore about more than obtaining a license. It is an effort to establish a regulatory identity of prediction markets in the region.

A successful financial-services framework could move platforms such as Polymarket closer to operating as regulated market infrastructure, with requirements around areas such as customer identification, surveillance and conduct. A continued focus on gambling categorization or binary-options restrictions, by contrast, could leave prediction markets facing country-by-country  restrictions and limited retail access.

The outcome of the regulatory debate will help determine how prediction markets fit into Europe’s financial system. At the center of the dispute is whether regulators accept the financial -market framework Polymarket is advocating or continue to apply gambling and retail-product restrictions to the sector.