Polymarket, the world’s largest prediction markets operator, is pressing European regulators to treat it as a financial services company rather than a gambling business. According to The Financial Times, the platform is holding meetings with authorities in the UK and across the European Union, alongside discussions with the European Securities and Markets Authority (ESMA) and the European Commission. The objective is straightforward: secure entry into markets where prediction platforms are currently restricted or banned outright.
The move sets up a jurisdictional tug-of-war over what a prediction contract actually is. Financial instrument or a bet? The answer decides which rulebook applies, and Europe has not settled on one.
What Polymarket’s Reclassification Push Means for the Market
The stakes here are regulatory identity. If Polymarket succeeds in being read as a financial services provider under the EU’s Markets in Financial Instruments Directive (MiFID), it gains a defined route into a continent that has largely shut the door on retail prediction trading. The following points frame the business implications.
- Regulatory arbitrage on the table: Classification under MiFID would let Polymarket sidestep national gambling regimes that have already banned it, replacing a fragmented licensing burden with a single financial-services perimeter.
- Gibraltar set the precedent. Earlier this year it became the first jurisdiction to build a dedicated regulatory framework for prediction markets, giving the sector at least one clean European foothold.
- The retail question is unresolved: ESMA’s July position treats binary, fixed-payout contracts as restricted financial instruments, which complicates any straightforward path to European retail customers.
- Political and sports outcomes may still fall outside financial rules entirely, leaving a chunk of Polymarket’s most popular markets in gambling territory.
- Reputational recovery matters: after bans in France and a scrapped Lazio sponsorship in Italy, a financial classification would help reset how European authorities perceive the brand.
European Scrutiny Has Been Tightening
Prediction markets remain largely off-limits to European retail customers under current rules. That gap is not accidental. In June, nine European gambling regulators launched a joint initiative aimed at unlicensed prediction market platforms operating across the continent.
Among them was France’s l’Autorité Nationale des Jeux, which banned the blockchain-based prediction platform Polymarket in 2024 after concluding its services could amount to unlicensed gambling. Italy went further in practice. Polymarket and Serie A club Lazio were pushed into a mutually agreed termination of their sponsorship deal after the Italian gambling regulator named the company as a prohibited site.
The pattern is consistent: where a national gambling authority holds jurisdiction, Polymarket has struggled. Which raises a harder question: can a financial-services label unwind decisions already made under gambling law?
The Regulatory Hurdles Are Real
ESMA weighed in for the first time in July, and its read was not entirely comfortable for the company. The regulator confirmed that prediction markets with binary yes-or-no outcomes and fixed payouts count as restricted financial instruments. It also stated that contracts linked to equities, indices, interest rates, currencies or commodities qualify as financial instruments and should be treated as derivatives.
Those contracts fall under Annex I of MiFID II. In plain terms, if a prediction contract tracks a financial variable, ESMA thinks it belongs under derivatives rules rather than casino oversight.
The jurisdictional map looks different depending on where you stand.
| Jurisdiction | Regulator | Position on prediction markets |
|---|---|---|
| European Union | ESMA | Binary fixed-payout contracts treated as restricted financial instruments; financial-linked contracts classed as derivatives under MiFID II Annex I |
| United States | CFTC | Oversees prediction markets as financial derivatives, though several states are pushing to regulate operators such as Polymarket and Kalshi under gambling laws instead |
| United Kingdom | FCA / Gambling Commission | Contracts on financial or certain climatic events fall to the FCA; sports and political outcomes sit with the Gambling Commission |
| Gibraltar | Dedicated framework | First jurisdiction to establish a purpose-built regulatory regime for prediction markets |
In the US, the Commodity Futures Trading Commission treats these products as financial derivatives. But that stance has drawn opposition from several states seeking to pull operators under gambling statutes. The split mirrors Europe’s own indecision.
The UK offers a partial template. In its FCA Perimeter Report, the Financial Conduct Authority said contracts on “financial or certain climatic events” fall within its remit, while non-financial events such as sports or political outcomes belong to the Gambling Commission. “We will consider whether we want to do further work on access to these products, and/or clarify the perimeter,” the FCA said. That is regulatory language for: we’re not done yet.
Building Allies in Brussels
Polymarket is not relying on meetings alone. Earlier this month it joined Blockchain for Europe, an organisation that works with policymakers to shape regulatory frameworks for blockchain-based innovation across the continent.
The membership signals a longer game. Rather than fight bans jurisdiction by jurisdiction, the company is positioning itself inside the policy conversation where the rules get written (a distinction that often matters more than the outcome of any single national dispute).
Why the Timing Works in Polymarket’s Favour
Europe’s regulators are actively deciding how to categorise these products right now, and that window gives Polymarket leverage it would not have once frameworks harden. ESMA’s July intervention was its first public word on the subject. The FCA has openly said it may clarify its perimeter. Gibraltar has already proven a dedicated regime is possible.
For a company that has been banned in France and forced out of an Italian sponsorship, the strategic logic is clear. A MiFID classification would convert a scattered set of prohibitions into a coherent, passportable licence across the single market. The precedent set in Gibraltar gives lobbyists something concrete to point to, and ESMA’s derivatives framing arguably hands Polymarket a partial argument, at least on paper, for markets tied to financial variables.
What remains less clear is how Europe reconciles two truths at once: that some prediction contracts look like derivatives, and that others look a lot like bets on football matches.
Frequently Asked Questions
Why does Polymarket want to be classified as a financial services company?
Classification under MiFID would give the platform a defined regulatory pathway into the European single market, bypassing the national gambling regimes that have already banned it in countries such as France and restricted it in Italy.
Are prediction markets legal for European retail customers?
Largely, no. They remain mostly unavailable to European retail customers under current rules, and in June nine European gambling regulators launched a joint initiative targeting unlicensed platforms.
How does ESMA classify prediction market contracts?
ESMA treats binary yes-or-no contracts with fixed payouts as restricted financial instruments. Contracts linked to equities, indices, interest rates, currencies or commodities are classed as derivatives under Annex I of MiFID II.
Which country first regulated prediction markets in Europe?
Gibraltar, which earlier this year became the first jurisdiction to establish a dedicated regulatory framework for the sector.
