Prediction markets have moved quickly from an American curiosity to a serious regulatory problem for governments on both sides of the Atlantic. Polymarket is one of the operators now trying to turn that momentum into a European foothold, lobbying regulators in the UK and EU to recognise its event contracts as financial products rather than gambling. This includes engaging with the Financial Conduct Authority, European Securities and Markets Authority (ESMA) and European Commission.
Needless to say, that would represent a significant change in how products based on outcomes such as politics and sport are treated. It would also give Polymarket a potential route around the gambling regulators that have already moved against it in several European markets.
The most notable bit is, however, whether Europe sees prediction markets as a new financial product that needs a tailored framework, or gambling presented in a different wrapper.
Leveraging the US Momentum
Much of the European debate is being shaped by what has happened in America. Prediction markets have expanded rapidly in the US despite some setbacks, with platforms such as Polymarket and Kalshi attracting substantial trading activity and growing interest from financial firms. The Commodity Futures Trading Commission (CFTC) has treated eligible event contracts as derivatives, while also proposing a more detailed framework for deciding which contracts can be listed.
The American experience therefore offers Europe both a model and a warning. A clear financial-market route could allow the sector to expand quickly, but the boundary between event trading and sports betting remains controversial at best.
Europe’s Much More Cautious Route
Unsurprisingly, European regulators have so far shown little appetite for simply importing the US approach. ESMA said in July that event contracts can qualify as financial instruments depending on the underlying event, but products that fall within the derivatives framework can also be subject to existing national restrictions on binary options. It also warned that event contracts may fall under national gambling laws.
The UK is facing a similar classification problem. The FCA’s current position is that prediction markets linked to non-financial events, including sport and politics, sit within the Gambling Commission’s remit. Financial event contracts can fall within the FCA’s perimeter, although the regulator currently considers the financial prediction-market products it has examined to be binary options that are banned from retail sale.
Gibraltar and Malta Point to Another Possibility
There are already signs that some European jurisdictions may be willing to develop more tailored approaches rather than forcing prediction markets entirely into existing categories.
Gibraltar has already introduced dedicated Prediction Market Regulations under its 2025 Gambling Act, and Predict Street appears on the territory’s approved licence-holder list as a betting intermediary. Gibraltar’s government has described prediction markets as a potential area of substantial growth. At the same time, Malta is exploring how prediction markets could fit into its regulatory framework, although its approach remains under development.
That said, the emergence of dedicated or adapted regimes suggests regulators may eventually have to decide whether prediction markets deserve their own category.
