Europe Tightens Grip on Prediction Markets as Regulators Act Across Multiple Fronts

Within a span of two weeks, European authorities have issued a series of measures that collectively restrict the operation of prediction markets on the continent. A French blocking order, a reminder from the European Union's securities regulator, and a new licensing regime in Gibraltar have drawn clear boundaries around these platforms.

France Blocks Polymarket After Extended Scrutiny

On 16 July, France’s gambling regulator, l’Autorité Nationale des Jeux (ANJ), directed internet service providers to block access to Polymarket, the largest prediction market platform. The ANJ stated that the site constitutes illegal gambling, citing 578,751 visits and 205,057 unique visitors from France in June alone. The move followed months of correspondence: since November 2024, the ANJ had flagged Polymarket’s activities as potentially unauthorised gambling. A formal notice was issued, and the company subsequently geoblocked financial transactions from France, but the regulator noted that users circumvented the restriction. In February 2025, the ANJ reiterated that prediction markets are illegal in France, warning of addictive features similar to regulated gambling without the corresponding consumer protections.

Enforcement escalated after integrity concerns arose. The ANJ revealed that some bets on the platform appeared rigged, including wagers on weather that suggested hacked sensors. On 4 May, the Paris Public Prosecutor’s Office cybercrime unit launched an investigation, which found that Polymarket lacked a know-your-customer system for French and European users. The ANJ applied a blocking power it uses frequently, having already blocked 1,290 URLs in 2025.

ESMA Clarifies Financial Instrument Status

On 3 July, the European Securities and Markets Authority (ESMA) issued a statement reminding firms of their obligations under existing product intervention measures for binary options. ESMA noted that event contracts—binary payouts based on yes/no questions about future events—may qualify as financial instruments under MiFID II. Where they do, they are derivatives subject to the EU-wide ban on marketing, distributing, or selling binary options to retail clients, in place since 2018. Even for non-retail clients, distributing such contracts requires authorisation as an investment firm.

Wulf Hambach, partner at Hambach & Hambach, explained that contracts referencing underlyings listed in Annex I, Section C(4)–C(10) of MiFID II—such as interest rates, currencies, commodities, emission allowances, inflation rates, or climate variables—are derivatives. This captures prediction markets on equity indices, FX pairs, rate decisions, and commodity prices. “Running such contracts requires a full MiFID II investment firm licence and restricted distribution to professional clients only,” Hambach said.

Ismail Vali, president of Gaming Compliance International (GCI), argued that ESMA’s statement fundamentally challenges the universal appeal of prediction markets. “Prediction markets have grown by presenting themselves as a universal marketplace for tradeable uncertainty…ESMA’s clarification starts to break that universality apart,” he said. Vali added that a contract asking whether bitcoin will trade above a certain level “looks much less like gambling innovation and much more like a binary financial product.”

Enforcement Imminent Under Existing Rules

Vali emphasised that ESMA is not creating new rules but reminding firms that current laws apply. “That is often the point at which enforcement becomes more likely, because regulators no longer need to wait for new legislation,” he noted. Hambach agreed, pointing out that the binary options ban dates from 2018, meaning national regulators already have established processes. “The enforcement risk is now imminent,” he said.

ESMA stressed that commercial labels are irrelevant; only a product’s legal and economic characteristics matter. Vali put it bluntly: “If a product functions as a financial instrument, it should not avoid financial regulation by calling itself a prediction market.” The EU’s crypto regime under MiCA does not offer an escape route. Hambach explained that tokenised contracts meeting MiFID II definitions are excluded from MiCA, and tokens tied to non-financial events such as sports or elections may qualify as “other crypto-assets,” requiring MiCA authorisation after the transitional period ends this month.

Gibraltar Introduces Dedicated Licensing Framework

On 13 July, ten days after ESMA’s statement, Gibraltar published regulations under its Gambling Act 2025, creating a distinct licensable category for prediction markets. Minister Nigel Feetham described it as “the first dedicated framework of its kind anywhere in the world.” The 24-page regime requires each event contract to be certified by the Gambling Authority, mandates anti-manipulation and insider-dealing controls, and prohibits contracts on criminal conduct, death, terrorism, or war. Two licensees—ADI Predictstreet and America’s WagerWire—have already been admitted.

However, ESMA’s clarification may limit what a Gibraltar or Malta licence can deliver in Europe. Hambach noted that binary event contracts tied to MiFID II underlyings are derivatives, caught by the retail ban regardless of gambling or MiCA licences. Stripping out financial contracts leaves largely sports, which Vali said “starts to look much less like a new financial innovation and much more like a betting exchange by another name.” In Germany, the gambling authority has already warned publicly against Polymarket, and Hambach noted that the licensability of sports prediction markets depends on their structure under the Interstate Treaty on Gambling.

Transatlantic Contrast and Market Implications

The difference between American and European regulatory treatment is now stark. In the US, operators have characterised event contracts as futures or swaps under the Commodity Exchange Act to claim federal override of state gambling laws. In Europe, the same financial classification triggers a retail ban. Vali argued that US regulatory arbitrage is unsustainable: “Regulatory arbitrage is not a durable marketplace strategy. The purpose of regulation is not to exclusively regulate regulated operators. The purpose of regulation is to regulate the marketplace.”

For global operators, Hambach predicted they must either heavily adapt to local rules—restricting product ranges and obtaining licences—or refrain from markets where neither is feasible. With the ANJ’s blocklist, ESMA’s reminder, and Gibraltar’s rulebook, Vali concluded that regulators will increasingly treat prediction markets as “tax and regulatory leakage” unless they demonstrate better consumer protection, integrity, and tax outcomes.