key insights:
- European regulators are still evaluating the individual event contracts, while Polymarket looks to be treated as a financial market.
- Financial classification is still possible under ESMA’s stance, while at the same time maintaining the current investor protection framework.
- An example of this is how one product category can be under different regulators depending on the underlying event as shown in the UK rules.
Polymarket’s escalating efforts to seek regulatory approval from the European Union and the United Kingdom are putting a new test on European prediction market regulation. P
Polymarket’s new regulatory push in the European Union and the United Kingdom is taking a new test to prediction market regulation in Europe. A push by the company to classify its event contracts as financial products instead of gambling products could help influence the way such markets are run in Europe.
Regulatory Push Expands Across Europe
Financial Times reported that Polymarket has held discussions with regulators in London, Brussels and several EU jurisdictions. The company has engaged the European Securities and Markets Authority and the European Commission while exploring routes toward a European operating license.
In June, ESMA Chair Verena Ross met two U.S.-based members of Polymarket’s legal team. A Paris-based lawyer from A&O Shearman and a Brussels-based representative from Hanbury Strategy also attended that meeting.
The following day, Polymarket executives met Nikhil Rathi, chief executive of the UK Financial Conduct Authority. The company has also reached out to regulators in the individual member states of the EU as it looks into individual licensing arrangements.
Polymarket stated that it is still dedicated to communicating with policy makers and regulators as it continues to expand internationally. ESMA and the FCA did not comment on the talks.
The company also became a member of Blockchain For Europe of the same month and also started discussions with other industry groups in Europe.The moves show that its regulatory campaign now extends beyond individual meetings with financial authorities.
MiFID Classification Creates Major Stakes
Polymarket wants European authorities to assess its contracts under the Markets in Financial Instruments Directive. The framework governs investment firms and financial instruments across the EU.
The company argues that its contracts resemble derivatives more closely than traditional bets. However, ESMA has stressed that the legal classification depends on the structure and underlying event of each contract.
In July, ESMA reminded firms that some event contracts may fall within existing rules covering binary options. The authority said firms must determine whether individual products qualify as financial instruments. It also noted that some contracts could qualify as bets under national gambling laws.
That distinction could create different requirements across Europe. A financial classification would not automatically give a platform unrestricted access to retail customers.
ESMA has also raised concerns about market abuse. The regulator has warned about insider trading risks as prediction markets attract more participants and cover a broader range of events.
UK Rules Highlight Regulatory Divide
The United Kingdom presents a separate regulatory challenge because oversight depends on the event underlying a contract.
The FCA says prediction market products tied to financial or certain climatic events fall within its regulatory perimeter. Political and sporting outcomes instead fall under the Gambling Commission’s remit.
The FCA currently treats financial prediction market products as binary options in cases it has reviewed. Its existing rules prohibit firms from selling binary options to retail consumers in or from the UK.
The regulator has nevertheless identified prediction markets as a growing issue. Its 2026 perimeter report said such products have expanded rapidly overseas and may require further regulatory consideration.
This creates a significant hurdle for Polymarket. Even if European authorities accept some contracts as financial instruments, existing retail protections could still restrict their distribution.
International Expansion Meets Regulatory Fragmentation
According to the Financial Times, the European campaign is part of a push by Polymarket to expand into other countries and raise funds at a valuation of more than $20 billion.
This European strategy is thus more than just a single authorization. The company is subject to other than EU financial market rules.
In several European countries, prediction markets have been described as a game of chance, which would add to the obstacles already in place any licensing requirement.Polymarket’s strategy is different from that, though, in that it seeks to create a financial-services structure on the lines of its contracts.
The effects are going to be more widespread than just one company. A clearer EU approach would impact the way that event contracts related to financial, economic, political, sports and other outcomes are judged.
But there are still questions on investor protection, market integrity and the financial instruments/gambling product divide that remain to be answered by regulators.
The FCA’s current binary-options system is an example of the challenge. The authority’s permanent retail ban came after it discovered some worries about the dangers to consumers and the speculative nature of binary options.
In this context, Polymarket is launching a broader discussion around event-based financial products in Europe. The result may make the difference between a more solid financial structure for prediction markets or a split on the question of securities vs gambling regimes.
