ESMA Questions Polymarket, Kalshi Access to EU Markets

Prediction markets settle contracts based on yes-or-no outcomes for future events, giving investors either a fixed payout or no return. If an event contract is deemed a financial instrument based on the question it poses, it is classified as a derivative. Several EU countries have replaced ESMA’s temporary ban with permanent measures since 2019, making Kalshi’s and Polymarket’s ability to serve retail clients critical to their continued presence in Europe.

The European Securities and Markets Authority (ESMA) said on July 3, 2026, that companies must assess event contracts individually. Any binary contract that qualifies as a financial instrument may not be marketed, distributed or sold to retail clients. Firms offering such contracts exclusively to non-retail clients must still obtain authorization as investment firms. Kalshi and Polymarket could be forced to modify their products or exit the market, while national regulators are set to strengthen cooperation on cross-border enforcement.

Kalshi and Polymarket allow users to wager on political, military and sporting outcomes through event contracts. Such products are regulated by the U.S. Commodity Futures Trading Commission, but have raised fairness concerns because people with access to confidential information could profit from them. In January 2026, a trader made more than $409,000 by betting on political developments in Venezuela.

On March 23, 2026, Kalshi barred candidates from betting on their own elections and prohibited sports insiders from trading related contracts. Polymarket also banned people with confidential information or the ability to influence outcomes from placing bets. On May 22, the U.S. House Committee on Oversight and Government Reform launched an investigation, saying more than 80 Polymarket users were linked to suspicious trades, and ordered both platforms to provide KYC and monitoring data by June 5.