Europe’s top regulator questions Polymarket and Kalshi’s EU access, warns of authorization gaps

Europe's securities regulator ESMA has flagged questions about whether certain event-based contracts offered by platforms like Polymarket and Kalshi can lawfully operate in the European Union. In its assessment, ESMA said these products may not sit outside existing rules and therefore could be subject to established EU restrictions.

Specifically, ESMA pointed to three potential regulatory regimes that might apply. Event contracts could be caught by the EU's existing bans on binary options, fall under the scope of the Markets in Crypto-Assets framework (MiCA), or instead be regulated at the national level as gambling under member-state laws. The regulator suggested that these overlapping possibilities create legal uncertainty about the correct treatment of such products.

The regulator also warned of gaps in authorization that could leave these platforms in a gray area regarding access to EU markets. That uncertainty raises the prospect that operators offering event contracts may need to seek appropriate permissions or adjust their product offerings to comply with whichever regime regulators determine is relevant.

ESMA's observations underscore the broader challenge of fitting novel financial and prediction-market products into existing legal frameworks. The regulator's comments suggest a need for clarity on how different EU and national rules apply to event contracts to ensure consistent supervision and protect market integrity.