July seemed to be the month that European regulators really got serious about their attempts to stop prediction markets from offering gambling products in their jurisdiction.
Maybe it was the World Cup, which drove record volumes on prediction markets globally, or an effort to take concrete measures before summer holiday season, but European regulators went from talking about prediction markets as a potential risk to actually cracking down on them.
French regulator ANJ was among the latest to take action, banning Polymarket, but authorities in the Czech Republic and Netherlands also cracked down on the vertical in July and regulators in Greece, Italy, Portugal, Spain, and Ukraine did so in prior months. Don’t be surprised to see more countries follow.
It has come not only from the gambling side, but also the European Securities and Markets Authority (ESMA) financial regulator, which said that many prediction market contracts related to financial indices count as restricted financial products. At the same time, it said many other prediction market contracts likely qualify as bets.
The relative swiftness with which much of Europe has taken action shows that the predictions wave that has overtaken the U.S. in the past year, and spooked sportsbook investors, simply does not translate in the same way to Europe. Their rapid rise in the U.S. owes a lot to a decidedly American kind of lawyerly work that isn’t really relevant in Europe.
Prediction markets have mostly relied on a genuine gap in American laws. The clash between federally regulated commodity futures and state regulated gambling, combined with some laws that were not really written well, allowed the likes of Kalshi to at minimum make good enough arguments to put the whole debate through layers of the courts system. In Europe, the same loopholes don’t really exist.
That’s not to say the prediction markets will have no activity in Europe.
They can likely continue to exist in the same way that dot-com online sportsbooks and casinos have done – by avoiding active marketing and IP-blocking countries that crack down more directly. If a country regulates sports betting too tightly, some customers who exit the regulated market might go to Polymarket or Kalshi.
Efforts in Gibraltar to come up with a set of prediction market regulations will help ensure that they exist in some form for European customers. The territory is adopting an “activity-based and risk-based approach” to regulating prediction markets, according to the regulations. That change should be a good thing, providing a bit more certainty for bettors using the exchanges.
But the way in which prediction markets will stick around, even with a seal of approval from one territory, will likely be a product for those who are specifically seeking a predictions-like product.
Without the convenient gap between financial and sports betting laws that exists in the U.S., prediction markets are unlikely to be anywhere near as big a threat to the established order in Europe as they have been in the U.S.
If they want to, of course, prediction markets are welcome to compete with sportsbooks on nationally regulated playing fields, at least in Europe’s larger markets where an exchange model is viable. Betting exchanges aren’t new and some of the non-sports subjects that prediction markets have offered bets on, like elections, have been offered by regulated betting operators in Europe in the past. European markets often allow room for more new entrants than U.S. state markets and have rules designed to allow for exchange-style wagering as well as bookmaking.
There are ways in which prediction markets have genuinely innovated beyond what Europe’s betting exchanges have done, and they could be a welcome addition to the market for at least some segments of bettors. Prediction markets would likely be able to carve out a respectable presence in their own right if they want to get betting licenses in some of Europe’s friendlier regimes.
But for now, it doesn’t seem like the major prediction market operators have much interest in trying to compete on those grounds. Maybe they’re still too set on insisting their products are different than “gambling,” a distinction that isn’t really fooling anyone. But it is difficult to see them becoming the disruptive force they have been in the U.S. The legal structure gives operators far less room to argue that they can play by a different set of rules.
Whatever path prediction markets take toward regulation, they’re likely to be one option among many in an established betting market, rather than a challenge to the sports betting world as we know it.
