Europe splits on prediction markets as ESMA, France and Gibraltar take different lines

European regulators are moving in different directions on prediction markets, leaving operators without a single, settled legal framework. In July, the European Securities and Markets Authority (ESMA) published guidance on when “event contracts” could be treated as financial instruments, Gibraltar introduced prediction market rules under its gambling regime, and France ordered internet service providers to block access to Polymarket.

According to Lee Hills, CEO of SolutionsHub, these actions show enforcement is accelerating but legal certainty is not. ESMA’s 3 July statement describes event contracts as products with a binary financial outcome based on whether a future event occurs. However, ESMA does not say all event contracts are financial instruments. That depends on the question asked and whether the underlying falls within MiFID II, which could make a contract a derivative and bring it within national restrictions on binary options for retail customers. ESMA also notes that some contracts may instead be treated as bets under national gambling laws, while tokenised contracts that are not financial instruments may fall under the EU’s Markets in Crypto-Assets Regulation (MiCA).

France has taken a harder national stance. The Autorité Nationale des Jeux ordered French internet service providers to block Polymarket after concluding it promoted unauthorised gambling services. The regulator also raised concerns about the effectiveness of location restrictions, customer identification and the integrity of certain markets. Hills argues the decision has immediate practical impact but does not create a Europe-wide legal precedent, particularly because gambling law remains largely non-harmonised across the EU.

Gibraltar has chosen a different path, introducing its own regulations for prediction markets on 13 July under its gambling framework. Hills said that shows “another answer is possible” when regulators create a dedicated route rather than forcing products into existing categories. He also points to the likelihood of mixed classification within a single operator—financial event contracts, sports markets, and tokenised contracts could each trigger different rules—meaning the sector may ultimately be defined “contract by contract, jurisdiction by jurisdiction and, where necessary, court by court.”

The debate is unlikely to stay purely administrative. Hills notes that in the US, courts have reached different conclusions in the Kalshi cases about the boundary between federal commodities law and state gambling laws on sports event contracts, and suggests Europe could also see court tests of statutory definitions and proportionality. He argues regulators should focus on conduct standards—market selection, settlement rules, disputed outcomes, suspicious trading, conflicts of interest, customer funds, advertising and financial crime—rather than relying on labels that may not fit how modern prediction products operate.