Key Moments:
- Nine European gambling regulators initiated enforcement action against prediction market platforms in June.
- On 3 July, ESMA released a statement confirming that binary payout prediction contracts are already covered by a 2018 financial ban.
- Gibraltar-based ADI Predictstreet has limited its offerings and faces added scrutiny from German authorities following recent investigations.
Regulators Tighten Oversight of Prediction Markets
Enforcement action targeting prediction market platforms widened after Europe’s financial regulator entered the fray with new guidance. Nine gambling authorities from Belgium, France, Germany, Italy, the Netherlands, Poland, Portugal, Spain, and Switzerland began coordinated enforcement efforts in June. The European Securities and Markets Authority (ESMA) followed suit on 3 July with a statement reinforcing financial-market bans on certain prediction contracts.
Details of the ESMA Statement
ESMA’s public statement, directed at firms and national regulators throughout the EU, addressed the classification of event contracts characterized by binary outcomes. According to ESMA, contracts based on simple yes-or-no results, with fixed payouts and tied to questions about future events, may qualify as financial derivatives if related to instruments covered under MiFID II, such as interest rates, currencies, commodity prices, financial indices, or specific economic variables like inflation and freight rates.
The statement emphasizes that products are subject to classification as binary options regardless of their branding. ESMA confirmed that these financial instruments have been subject to a marketing, distribution, and sales ban under national regulations since 2018. Firms providing investment services related to these contracts require MiFID II authorization, even if they exclusively target non-retail clients.
Impact and Developments Surrounding the World Cup
The timing of ESMA’s announcement closely followed the public pledge by nine European gambling regulators on 17 June, which targeted unlicensed prediction market platforms during the World Cup. These regulators urged sports federations to verify operator licensing before forming partnerships and warned that the appeal and viral nature of these platforms could foster addictive behaviors, stating the products’ design “creates a significant addictive cycle.”
Spain’s gambling authority (DGOJ) had already taken action on 26 May, directing internet providers to block access to Kalshi and Polymarket during an ongoing investigation into their possible violation of national gambling laws.
Classification Challenges and Operator Responses
ESMA’s stance does not introduce new restrictions but asserts that the existing ban applies, giving non-gambling regulators a foundation for parallel enforcement. Operators must now address two regulatory angles: whether their contracts are considered gambling and whether they are also financial derivatives as defined by MiFID II. Both designations can apply simultaneously, regardless of a platform’s marketing language.
No prediction market operator currently holds a retail license within the EU. ADI Predictstreet, licensed in Gibraltar and serving as FIFA’s official prediction market partner, operates outside the EU single market and confines its European offerings to sports contracts facilitated through UK and Irish exchange partners. Gibraltar authorities have now allowed ADI Predictstreet to extend into new market categories – such as entertainment, culture, weather, and selected political events – once the World Cup ends. This move brings the platform closer to the types of products that have triggered warnings from both gambling regulators and ESMA.
Intensified Scrutiny and Enforcement Actions
Germany’s GGL has opened a formal investigation into ADI Predictstreet’s World Cup marketing activities and unlicensed operation status within the country, leading the platform to geo-block German users.
| Date | Event | Regulator/Authority | Platform(s) Involved |
|---|---|---|---|
| 26 May | Order to block prediction platforms during investigation | Spain’s DGOJ | Kalshi, Polymarket |
| 17 June | Coordinated enforcement pledge by gambling regulators | Belgium, France, Germany, Italy, Netherlands, Poland, Portugal, Spain, Switzerland | Multiple prediction market platforms |
| 3 July | Public statement confirming financial ban on binary outcome contracts | European Securities and Markets Authority (ESMA) | All applicable event contract platforms |
- Author
Daniel Williams
