Prediction markets have established a stable, if highly controversial, regulatory niche in the USA and are reaping the rewards from sidestepping traditional gambling markets. So what about Europe? Early signs suggest that any path to success will be significantly more complex.
Over the past 18 months, prediction markets have completely upended the gambling ecosystem in the United States. The likes of Kalshi and Polymarket have gone over the heads of the state regulators to offer a nationwide betting-like service without the need to acquire numerous state-managed licences.
Billing themselves as an alternative financial product, rather than a betting platform, prediction markets are regulated in the US by the Commodities Future Trading Commission (CFTC).
Using these platforms to make a forecast on the Superbowl, operators argue, is no different than risking money on the fluctuating price of corn or whether Disney stock will fall in a week’s time.
That viewpoint has the backing of none other than US President Donald Trump, whose administration has given clear approval to the sector, much to the outrage of the many online sports betting operators still toiling under the various regulations imposed by individual states.
Not such a warm welcome
Europe, however, looks to be a less friendly playing field.
This week, the Netherlands Gambling Authority (KSA) issued Polymarket with a cease and desist order, and a threat of weekly fines of €420,000 if it did not withdraw from the Dutch market.
The authority said that the predictions giant had been offering markets on last year’s Dutch election and ensuing coalition negotiations, which have now ended the appointment of Rob Jetten as Prime Minister.
“Although Polymarket itself states that prediction markets do not fall under the category of gambling, the KSA has taken a different stance,” the regulator said.
“After contacting the company about its illegal activities on the Dutch market, there has been no visible change, and the offering remains available.”
As of the time of publication Polymarket now lists the Netherlands among the group of territories where it says trading is prohibited.
The other European markets where Polymarket declares it will not accept wagers are Belgium, France, Germany, Italy, Poland, Russia and the UK.
Kalshi provides a similar list, which includes Ukraine, Switzerland and Hungary.
That leaves large swathes of Europe available for these companies to operate in, but the status of those operations is unclear at best.
Unlike the US, there is no backing from the EU-level financial regulators for prediction markets. To date, Brussels has not seen fit to comment on the sector at all.
While some legal experts have argued that predictions operators will be able to work in the same sort of legal grey area they enjoy in the US, others are less confident.
“Any other gambling jurisdiction [apart from the US] would regard prediction markets as gambling,” said David Zeffman, head of gambling at London law firm CMS.
Polymarket did not responded to a request for comment on its KSA enforcement by time of publication.
UK sends a message
Although the UK now marches to the beat of its own regulatory drum post-Brexit, there may still be some clues for the rest of Europe in the way that the Gambling Commission (UKGC) has chosen to approach the sector.
In a statement released earlier this month on whether predictions markets are allowed in the UK, the conclusion is very clear: These are just betting exchanges.
“If a prediction market operator was to launch here in Great Britain, we do not believe they would be able to classify themselves as non-gambling products,” said Brad Enright, the commission’s director of strategy.
If Polymarket, Kalshi or another similar company wanted to operate in the UK, it would need to acquire what the regulator calls a “betting intermediary licence”.
“Their core aspects are akin to what in the UK would be described as a ‘Betting Exchange’,” concluded Enright.
Even if prediction markets could successfully argue that they are more akin to financial products, David Zeffman of CMS told EEGaming that this would not create any room to manoeuvre.
“As far as the UK is concerned, it’s either gambling (and then falls under the GC’s jurisdiction) or it’s a financial instrument (and then falls under the FCA’s jurisdiction) – I don’t think there’s any gap between these,” he said.
Didn’t we already do this?
This characterisation of prediction markets as betting exchanges matches what several industry veterans have been saying for some time. Particularly those with long memories, who recall the arrival of Betfair over 20 years ago and the revolutionary effect it had on the market.
The ability to lay bets against another gambler proved to be extremely compelling and Betfair eventually became part of what is now industry giant Flutter.
However despite its originality and impact, time has shown that traditional bookmaking is significantly more popular.
Figures from the Gambling Commission for the 24/25 financial year show that exchanges accounted for just 3.9 percent of the online betting market, compared to 95.3 percent for standard bets.
In the current early days of prediction markets in the US, they do seem to be taking a bigger slice of the pie.
Analysis by the Financial Times suggests that Kalshi is generating annual sports wagering revenues of around $1.3bn, compared to the total US sports betting market of $14bn.
In a strange circular twist of fate Flutter and its chief rival DraftKings have abandoned their allies from the US casino industry and signalled plans to open stateside prediction markets of their own.
But despite their growing status in the USA, precisely how much grey market grace prediction markets can enjoy in Europe is uncertain, but so far the European regulatory response seems significantly colder than the warm embrace of Trump’s America.
