European securities regulator ESMA has flagged prediction platforms including Polymarket and Kalshi as a threat to investors and market integrity. In its semi-annual risk report, the watchdog said such services require continuous monitoring due to client protection gaps and manipulation risks.
ESMA noted that for retail players, prediction markets are a "speculative gambling environment" without the safeguards standard to regulated financial products in the EU. Gamified structure, emotional dynamics and social-media promotion expose inexperienced users to financial loss, addictive behaviour and exploitation by professional traders. Market manipulation and insider trading risks are acute on platforms with minimal identity verification.
In April, US serviceman Gannon Ken Van Dyke was charged with placing bets on Polymarket on an operation against Venezuelan leader Nicolás Maduro and profiting. The accused pleaded not guilty.
ESMA's stance contrasts with the US approach, where federal authorities have approved several financial products based on prediction contracts. In most EU member states, Polymarket and Kalshi remain unauthorised, though users access them via VPN. Malta is exploring a regulatory framework for such markets. Both platforms state on their sites that users from "some but not all" EU countries are barred from placing orders.
Polymarket announced expanded European presence this week and joined Brussels association Blockchain for Europe. Chief legal officer Neal Kumar said the company is ready for early and open dialogue with European regulators. Kalshi, which overtook Polymarket by volume this year, is also in talks with international supervisors about replicating its US model abroad.
