ESMA says Polymarket, Kalshi lack EU authorization

Europe’s markets watchdog said the biggest prediction-market platforms do not hold the authorisation generally required to market and sell event contracts in the EU. It also cast doubt on the partial country blocks used by Polymarket and Kalshi, saying users can still reach the platforms through some routes and that not all member states are excluded.

In a report published Thursday, ESMA said event contracts can fall under different regulatory regimes depending on their characteristics. Some may be financial instruments under MiFID II, in which case they are treated as derivatives. Others may fall under MiCA if they are blockchain-based but do not qualify as financial instruments, or under national gambling law.

Where event contracts qualify as financial instruments, ESMA said the bloc’s national product intervention measures on binary options apply. Those rules prohibit marketing, distribution and sale to retail investors, and distribution of such products even to non-retail clients requires MiFID II authorisation as an investment firm.

ESMA said the largest prediction-market platforms currently do not hold that EU authorisation. The warning centered on platforms such as Polymarket and Kalshi, which the report said bar users in some, but not all, EU countries from placing orders.

The regulator also raised broader market-integrity concerns. It pointed to insider trading and manipulation risks, especially on distributed-ledger platforms such as Polymarket, where limited identity checks and pseudonymous participation can make suspicious activity harder to detect. It said measures to curb suspicious trading are largely reactive.

ESMA added that prediction markets face risks around contract resolution, data sources and smart-contract execution. It said the market remains relatively limited in scale inside the EU, even as established exchanges including Eurex, Euronext, CME Group, Cboe, ICE and Nasdaq show growing interest in prediction-style products and related infrastructure.

ESMA said the national product intervention measures that mirror its binary-options rules are currently in place in all EU member states.