Europe Tightens Regulation on Prediction Markets

On July 16, the French National Gambling Authority (ANJ) ordered internet service providers to block access to Polymarket, a well-known prediction market platform. The regulator claimed that the site promotes illegal betting services, accumulating 578,751 visits and 205,057 unique visitors in June. This action was the result of monitoring initiated in November 2024 against Adventure One QSS Inc, the operator of Polymarket, as its services were deemed unauthorized betting. Although the company limited financial transactions from France, the ANJ observed that this measure was easily bypassed. In February of this year, it reiterated that these sites are illegal in France due to addictive characteristics similar to regulated betting.

Investigation and Legal Measures

The main concern was integrity. Some bets appeared to be rigged: it was suggested that weather sensors may have been hacked. On May 4, the Paris Prosecutor's Office opened an investigation into Polymarket by the French Cybercrime Agency, highlighting the lack of a system to verify users' identities. With the site promoting unauthorized betting, a fine of €100,000 was imposed. France is not an exception; Germany, Belgium, Romania, and other European countries have adopted similar measures against prediction markets.

Actions by the ESMA

On July 3, the European Securities and Markets Authority (ESMA) issued a statement reminding companies of the obligation to verify whether new products are considered binary options under current regulations. Event contracts that depend on a yes/no outcome are financial instruments and require authorization as investment firms. Wulf Hambach, a legal expert, explains that these contracts are derivatives under MiFID II and must comply with stringent restrictions.

Changes in Regulation

Ismail Vali of Gaming Compliance International highlights that the ESMA's intervention fragments the prediction market, turning products like "Will Bitcoin exceed a certain value?" into binary financial products, diverting them from innovation in betting. Hambach asserts that the ESMA's statement could facilitate enforcement of the rules without needing new legislation to act.

Gibraltar's Movement

Gibraltar has decided to create its own regulatory framework. On July 13, it established regulations under the Gambling Act of 2025, recognizing prediction markets as a distinct licensing category. This allows licensees like ADI Predictstreet to operate under rules prohibiting market manipulation and transactions related to crimes.

The Transatlantic Contrast

In the United States, operators have classified event contracts as futures under the Commodity Exchange Act, asserting the supremacy of federal law over state law. In Europe, this classification activates a ban at the retail level. Hambach concludes that companies will need to significantly adapt to local regulations, obtaining licenses or withdrawing from non-viable markets.