ESMA says Polymarket, Kalshi lack EU approval to offer event contracts

Sept. 11 — The European Securities and Markets Authority (ESMA) said in a new risk report that leading prediction-market platforms such as Polymarket and Kalshi do not currently hold the EU authorizations typically required to offer event contracts to users. ESMA said the regulatory treatment of event contracts depends on the specific product design. They may be classified as a financial instrument, a cryptoasset captured by the MiCA framework, or regulated under member-state gambling rules. If treated as a financial instrument, ESMA said the product would generally be considered a derivative and could fall under the EU's retail restrictions on binary options. The watchdog also raised doubts about the platforms' current EU geofencing measures, noting that both Polymarket and Kalshi restrict access in only certain member states. ESMA said it is unclear why the restrictions do not cover all EU countries and pointed to the risk that users can circumvent geographic limits via VPNs. In July, France asked internet service providers to block Polymarket. Separately, ESMA warned that the AI boom could become a new channel for risk transmission in crypto markets. If AI-related investment returns disappoint or technology stocks come under selling pressure, large investors may liquidate highly liquid risk assets—including cryptoassets—to raise cash. ESMA data show Bitcoin fell 35% in the first half of 2026, while U.S. spot Bitcoin ETFs recorded more than $5.5 billion of outflows over the same period. ESMA reiterated that if event contracts are deemed financial instruments, distributing them in the EU would require an investment firm license and could be subject to the retail ban on binary options.