Europe Tightens the Screws on Polymarket and Kalshi

In its risk report of September 10, 2026, ESMA states that neither Polymarket nor Kalshi hold the required authorization to operate in the EU. The European regulator considers the event contracts offered by these two giants as financial derivative products. Therefore, they are subject to mandatory authorization which these platforms do not possess. An analysis of a showdown that could redefine the future of the prediction market on the Old Continent.

Why is ESMA targeting Polymarket and Kalshi in the prediction market now?

The signal comes from the Risk Monitor published by the European Securities and Markets Authority. The institution observes a spectacular acceleration of the prediction market since the 2024 US presidential election. Evidence: Kalshi recorded about $8.8 billion in volume in Q4 2025, compared to $12 billion for Polymarket. The total thus reaches $20.8 billion over a three-month period.

However, the two giants of the prediction market do not operate in the same way:

• Kalshi is a centralized platform regulated in the United States by the CFTC, the Commodity Futures Trading Commission.
• Polymarket combines trading and settlement on the blockchain with centralized governance. Its architecture directly links the prediction market to crypto, DeFi, and smart contracts.

The composition of their volumes also reveals two clienteles.

• On Kalshi, sports account for 73% of identified activity.
• On Polymarket, politics represents 29%, ahead of sports at 19% and contracts linked to crypto-assets at 15%.

Regulatory risks therefore do not depend solely on the platform. They vary according to the event and the structure of each contract.

What authorizations are Polymarket and Kalshi missing?

In its report, ESMA makes a direct observation:

The marketing and sale of event contracts in the European Union generally require European authorization, which the main prediction market platforms currently do not hold.

Specifically, the European regulator identifies three scenarios:

• When the contract is based on a financial variable, it is considered a binary option. This product has been prohibited from sale to retail investors for several years in the EU due to massive losses it caused.
• When it relies on blockchain technology without constituting a financial instrument, it may fall under the MiCA regulation (Markets in Crypto-Assets). This governs crypto-assets within the EU.
• In all other cases, national legislation on gambling applies. Rules thus vary from country to country.

The same prediction market can thus change legal status based on its underlying asset, its technology, and the user’s country. This is the central difficulty for European regulation. The fact is that there is no single passport automatically covering political, sports, economic, and crypto betting.

Good to know: In July 2026, France ordered internet providers to block Polymarket. Spain also temporarily targeted Polymarket and Kalshi as of May for lack of gambling licenses. Restrictions also existed in Switzerland, Poland, Belgium, and Portugal.

A systemic risk beyond the prediction market itself

Why does this issue concern the entire crypto ecosystem and not just betting platforms? Because ESMA links it to a broader vulnerability.

The regulator warns about massive spending by tech giants in artificial intelligence funded on credit. These inflate stock market valuations. And not only that! They also (and especially!) raise the risk of a bubble.

Analysis: correction in equity markets could push large investors to sell their most liquid assets, including cryptocurrencies. The goal is to raise cash.

Moreover, the numbers already illustrate this vulnerability:

• The bitcoin price dropped 35% in the first half of 2026, while some smaller tokens lost up to 61% of their value.
• The US Bitcoin ETFs recorded over $5.5 billion in outflows, compared to nearly $2 billion losses for Ethereum ETFs.

Prediction Market: Can Europe slow down an already institutionalized sector?

European tightening occurs as the prediction market enters traditional finance.

• ICE has notably committed to investing up to $2 billion in Polymarket and distributing its event data.
• In June 2026, Cboe launched products linked to the closing level of the S&P 500 while Nasdaq received the green light from the SEC for predictive options on the Nasdaq-100.
• Galaxy Digital also offers since June over-the-counter transactions intended for institutions on contracts referenced to Polymarket and Kalshi.

Europe thus has levers, but its fragmented architecture slows their implementation. ESMA therefore requests that each event contract be qualified before marketing, instead of treating the entire prediction market as a homogeneous category.

For Polymarket and Kalshi, the challenge now goes beyond a few national blockages. They will have to prove that their licenses, identity checks, operation monitoring, and geographic restrictions really correspond to each country served. Otherwise, the growth of the prediction market could continue outside Europe.