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ESMA flags Polymarket and Kalshi EU authorization gaps for prediction contracts
ESMA said event contracts may trigger EU binary-options bans, MiCA rules, or national gambling laws, leaving enforcement and VPN use risks unresolved.
Europe’s securities regulator, ESMA, warned that major prediction markets including Polymarket and Kalshi do not have the authorization generally required to serve users in the European Union. In a risk report released Thursday, the regulator said the marketing and sale of event contracts in the EU typically requires an EU authorization that the largest platforms currently do not hold.
ESMA said event contracts can fall under multiple legal buckets depending on how they are structured, including existing EU bans on binary options, the Markets in Crypto-Assets framework for certain crypto-asset arrangements under MiCA, or national gambling laws. The regulator also noted that the platforms prohibit trading from some EU countries but do not restrict access from all EU member states.
The report questioned why some EU countries are not included in ESMA’s described restricted lists, and it raised concerns about unauthorized services and potential breaches of existing retail trading restrictions. ESMA also warned about the ability of platforms to enforce bans on virtual private networks, which can be used to mask user locations.
ESMA further warned of potential cross-asset risk, stating that heavy AI spending is inflating technology valuations and that a stock sell-off could weigh on crypto assets that are closely tied to tech market moves. The regulator pointed to prior country actions, including France ordering internet service providers to block access to Polymarket in July, after similar blocks in multiple other countries.