European Lotteries calls for coherent prediction-market rules

European Lotteries has called for a coherent European approach to prediction markets, arguing that fast-growing event-contract products should not create regulatory gaps or weaken consumer safeguards.

In a Sept. 30 statement, the association said policymakers should apply rules according to a product’s legal characteristics, economic substance and risks, rather than the label attached to it or the technology used to deliver it. Its position is that similar-risk activities should face similar safeguards, including when they use blockchain, smart contracts, tokenisation or other distributed-ledger technology.

Prediction markets let users take positions on the outcome of future events, such as elections, economic indicators or sporting competitions. The contracts generally offer a fixed payout, or none, depending on a yes-or-no outcome.

Piet Van Baeveghem, European Lotteries’ secretary general, said regulation needed to keep pace with the market’s development. “Activities that present similar risks should be subject to similar safeguards,” he said.

The group did not call for a separate regulatory regime. Instead, it said prediction markets should remain within the existing European regulatory architecture, with authorities applying and enforcing current rules consistently. Its four principles are classification based on a product’s characteristics and risks; preservation of member states’ authority over gambling; no technology-based exemptions; and close coordination between financial and gambling regulators.

That approach reflects the split in the present system. Contracts that qualify as financial instruments under MiFID II are subject to financial-services rules, but that classification does not in itself remove the possible application of national gambling laws. Gambling remains a national competence, so a product’s legality and regulatory treatment must be assessed country by country.

European Lotteries welcomed the European Securities and Markets Authority’s view that event contracts may also qualify as bets under national gambling legislation. ESMA has said that not every event contract is a financial instrument: the classification turns on the event question and its relationship to specified MiFID II underlyings.

Where an event contract is a financial instrument, ESMA treats it as a derivative covered by national product-intervention measures on binary options. Marketing, distributing or selling such contracts to retail clients is prohibited under the applicable national measures, while EU distribution even to non-retail clients requires investment-firm authorisation.

ESMA has also stressed that a product’s commercial name does not determine its MiFID II status. Token-form contracts that are not financial instruments may instead be crypto-assets regulated under the Markets in Crypto-Assets Regulation.

As covered in September, ESMA had already warned that the largest prediction-market platforms lacked the authorisation generally required to market and sell event contracts in the EU. European Lotteries said the regulator’s position reinforced the case for close coordination between financial and gambling authorities.

The call comes amid divergent national responses. France, the Netherlands and Spain have imposed restrictions or blocks on platforms including Polymarket and Kalshi, while nine European regulators have announced a joint initiative against unlicensed prediction-market platforms. Their concerns include round-the-clock access without mandatory betting limits or cooling-off periods.

European Lotteries is an umbrella group for national lotteries and other games-of-chance operators, including sports-betting providers. It has 71 members across 41 European countries, including 50 members in EU member states and 20 in non-EU countries.