Polymarket is stepping up its engagement with European and British regulators as it seeks to establish prediction markets as financial products rather than gambling services, a classification that could open new routes for the platform’s international expansion.
The company, which operates one of the world’s largest prediction markets alongside rival Kalshi, has encountered regulatory restrictions across Europe. Authorities in France, Italy and the Netherlands have blocked or restricted access to Polymarket after determining that its event-based contracts fall within their gambling laws.
According to the Financial Times, Polymarket is seeking to persuade European authorities to adopt an approach similar to that of the US Commodity Futures Trading Commission (CFTC), which regulates certain event contracts as financial derivatives.
The company has reportedly held discussions with regulators in London and Brussels, including the European Commission, the European Securities and Markets Authority (ESMA) and Britain’s Financial Conduct Authority (FCA). It has also engaged with national regulators across the European Union.
Polymarket’s proposed approach would bring qualifying event contracts under financial services legislation, potentially including the EU’s Markets in Financial Instruments Directive (MiFID), rather than requiring the company to obtain conventional gambling licences.
European Regulators Question Financial Classification
Polymarket faces substantial regulatory obstacles because European authorities have generally treated contracts linked to sports, political developments and other real-world events as gambling products.
To secure a different classification, the company must demonstrate that its contracts qualify as financial instruments and should consequently fall under financial regulators rather than national gambling authorities.
ESMA has been discussing the matter with Polymarket since June, according to the Financial Times. In July, the European securities regulator acknowledged that certain event contracts could qualify as financial instruments or derivatives, while others would not meet the relevant criteria.
The distinction means Polymarket cannot assume that all its markets would receive the same regulatory treatment.
ESMA has also identified investor protection and market integrity concerns associated with prediction markets, including the potential for insider trading.
These questions arise as European governments continue tightening gambling regulations and strengthening consumer protection requirements. Authorities in several countries have already taken enforcement action against prediction market operators offering services without the necessary authorisation.
Nevertheless, the sector’s commercial growth has attracted attention. Monthly prediction market trading volumes in the United States have reached approximately $24 billion, according to figures cited by SBC News.
Polymarket’s campaign therefore centres on whether European authorities can establish a regulatory route for event contracts without treating every product as conventional gambling.
UK Regulatory Position Remains Unresolved
Britain has not formally classified and blocked Polymarket in the same manner as several European jurisdictions, but the legal treatment of prediction markets remains unsettled.
The UK Gambling Commission has stated that commercial products meeting the statutory definition of gambling must be licensed and regulated under British gambling legislation.
Spread betting is an exception because it falls under the supervision of the FCA.
Although the Gambling Commission has not issued a formal determination covering prediction markets as a whole, it has indicated that operators entering Great Britain would be unlikely to establish that their products fall entirely outside gambling regulation.
Meanwhile, the FCA has been consulting on proposals to expand consumer access to investments, including the treatment of speculative financial products.
That process could provide an opportunity to consider certain prediction market contracts within the financial regulatory framework, although no decision has been announced establishing such a route for Polymarket.
Gibraltar and Malta Explore Alternative Regulatory Routes
While Polymarket continues discussions with European financial authorities, Gibraltar and Malta are developing approaches that could accommodate prediction market operators.
Gibraltar has already introduced a dedicated regulatory pathway for the sector, licensing ADI Predictstreet as the first betting intermediary under its new gambling framework.
The British Overseas Territory has also moved to establish specific arrangements for licensing and supervising event contracts as part of its wider gambling legislation reforms.
Malta, an EU member state and established gambling licensing jurisdiction, is taking a more cautious approach.
Its government is examining a statutory framework for prediction markets that would assess different types of contracts individually rather than automatically treating every event-based product as conventional betting.
A framework introduced by Malta could become particularly relevant to the industry’s European expansion because of the country’s position within the EU and its established gambling regulatory infrastructure.
However, a Maltese authorisation would not automatically override gambling restrictions imposed by other EU member states.
US Legal Disputes Add to Regulatory Uncertainty
Polymarket’s European campaign comes as prediction market operators face legal challenges in the United States over the division of authority between federal financial regulators and state gambling authorities.
Polymarket and Kalshi have expanded their event-contract businesses under federal derivatives regulation, while several states have challenged whether contracts tied to sporting events can be offered without complying with local sports betting laws.
New Jersey has sought US Supreme Court intervention to clarify the regulatory treatment of event contracts.
In New York, Governor Kathy Hochul and Attorney General Letitia James have also pursued legal action against Kalshi over allegations that its sports-related markets circumvent state betting requirements.
These disputes demonstrate that federal financial regulation has not eliminated disagreements over the legal status of prediction markets, even in the companies’ principal growth market.
For Polymarket, securing acceptance from European financial regulators could provide an alternative to navigating separate gambling licensing requirements in individual countries.
However, the outcome will depend on how authorities classify specific contracts, which consumer protection rules apply and whether national restrictions can coexist with any broader financial regulatory framework.
Until those questions are resolved, Polymarket’s expansion across Europe remains dependent on regulatory decisions rather than an established, unified market-access regime.