In its risk report of September 10, 2026, ESMA states that neither Polymarket nor Kalshi have the required authorization to operate in the EU. The European regulator considers the event contracts offered by these two giants to be financial derivative products. They are therefore subject to mandatory authorization that these platforms do not have. Deciphering a standoff that could redefine the future of the prediction market on the Old Continent.
In brief
- ESMA claims that Polymarket and Kalshi do not have the required authorization in the EU.
- Three possible legal regimes govern the prediction market: binary options, MiCA, or gambling.
- Eight European countries have already blocked these platforms, including France since July.
- Bitcoin fell 35% in the first half, a risk that ESMA links to the AI bubble.
- The prediction market could be worth $1 trillion by 2030.
Why is ESMA targeting Polymarket and Kalshi in the prediction market now?
The signal comes from Risk Monitor published by the European Securities and Markets Authority. The institution has observed a spectacular acceleration in the prediction market since the 2024 US presidential election. The proof: Kalshi recorded around $8.8 billion in volume in the fourth quarter of 2025, compared to $12 billion for Polymarket. The total therefore reached $20.8 billion over a three-month period.
However, the two giants of the prediction market do not work in the same way:
- Kalshi is a centralized platform regulated in the United States by the CFTC, the Commodity Futures Trading Commission.
- Polymarket combines trading and settlement on the blockchain with centralized governance. Its architecture directly brings together the prediction market of crypto, DeFi and smart contracts.
The composition of their volumes also reveals two clienteles.
- On Kalshi, sports concentrate 73% of identified activity.
- On Polymarket, politics represents 29%, ahead of sports at 19% and contracts linked to crypto-assets at 15%.
Regulatory risks therefore do not depend solely on the platform. They change depending on the event and the structure of each contract.
What permissions are missing in Polymarket and Kalshi?
In his reportESMA makes a direct observation:
Marketing and selling event contracts in the European Union generally requires European authorization, which the major predictive market platforms do not currently hold.
Concretely, the European regulator distinguishes three scenarios :
- When the contract concerns a financial variable, it is assimilated to a binary option. This product has been banned for sale to individuals for several years in the EU due to the massive losses it caused.
- When it is based on blockchain technology without constituting a financial instrument, it may fall under the MiCA (Markets in Crypto-Assets) regulation. The latter regulates crypto-assets within the EU.
- In all other cases, national gambling legislation applies. The rules therefore vary from one country to another.
The same prediction market can therefore change its legal status depending on its underlying, its technology and the user’s country. This constitutes the central difficulty for European regulation. The fact is thatthere is no single passport automatically covering political, sports, economic and crypto betting.
Good to know: in July 2026, France ordered ISPs to block Polymarket. Spain, too, temporarily targeted Polymarket and Kalshi in May for lack of gaming licenses. Restrictions even existed in Switzerland, Poland, Belgium and Portugal.
A systemic risk that goes beyond the prediction market alone
For what does this file concern the entire crypto ecosystem and not just betting platforms? Because ESMA links it to broader fragility.
The regulator is indeed warning about the massive spending by technological giants on artificial intelligence financed on credit. The latter inflate stock market valuations. And not only that! They also (and above all!) get you high the risk of a bubble.
Decryption: the correction on the stock markets could push large investors to sell their most liquid assets, including cryptocurrencies. The goal is to raise liquidity.
Moreover, the figures already illustrate this vulnerability :
- The price of bitcoin fell 35% in the first half of 2026, while some smaller tokens lost up to 61% of their value.
- US Bitcoin ETFs saw over $5.5 billion in outflows, compared to nearly $2 billion in losses for Ethereum ETFs.
Prediction market: can Europe slow down an already institutionalized sector?
European toughening comes at a time when the prediction market wins traditional finance.
- ICE has notably committed to investing up to $2 billion in Polymarket and distributing its event data.
- In June 2026, Cboe launched products tied to the S&P 500 closing level while Nasdaq received the green light from the SEC for predictive options on the Nasdaq-100.
- Since June, Galaxy Digital has also been offering over-the-counter transactions for institutions on contracts listed on Polymarket and Kalshi.
Europe therefore has levers, but its fragmented architecture slows down their application. ESMA therefore requires that each event contract be qualified before its marketing, instead of treat the entire prediction market as a homogeneous category.
For Polymarket and Kalshi, the issue now goes beyond a few national blockages. They will have to prove that their licenses, identity checks, operational monitoring and geographic restrictions actually correspond to each country served. Otherwise, the growth of the prediction market could continue outside Europe.
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