EL Calls for Regulatory Coherence as Prediction Markets Grow in Europe

The European Lotteries (EL) has called for a coherent regulatory approach that ensures the new and emerging products do not create gaps or arbitrage which would weaken existing consumer safeguards.

Prediction markets - allowing users to take positions on the outcome of future events, from elections and economic indicators to sporting competitions, through so-called “event contracts” - raise important questions at the intersection of financial services and gambling regulation.

The regulatory treatment of prediction markets should depend on the legal characteristics, economic substance and associated risks of the products concerned, rather than on the terminology used to market or describe them, or the technology through which they are offered.

Under the current European regulatory framework, event contracts that qualify as financial instruments under the Markets in Financial Instruments Directive (MiFID II) are subject to the applicable financial services rules. Where event contracts do not qualify as financial instruments, their treatment depends on the relevant national gambling framework. Importantly, qualification as a financial instrument does not, in itself, create an exemption from otherwise applicable national gambling legislation.

As gambling regulation remains a national competence, the legality and regulatory treatment of prediction market services must be assessed on a jurisdiction-by-jurisdiction basis. This reflects the fact that gambling policies are deeply rooted in national legal frameworks, public policy objectives, consumer protection considerations and market structures, which can vary significantly across Member States. This makes regulatory coherence and effective coordination between authorities particularly important.

EL also stresses that technological developments, including distributed ledger technology (DLT), blockchain, smart contracts and tokenisation, should not alter the underlying regulatory analysis. Regulatory frameworks should remain technologically neutral, ensuring that equivalent activities are subject to equivalent rules regardless of the technology used to deliver them.

“Prediction markets are developing rapidly, and regulation should keep pace. EL’s position is simple: activities that present similar risks should be subject to similar safeguards. The focus should be on the nature of the product and activity, rather than the label or underlying technology attached to it. We welcome the recent statement by the European Securities and Markets Authority (ESMA), which explicitly recognises that event contracts may also constitute betting under national gambling law. This underlines the importance of close coordination between financial and gambling authorities to ensure a coherent regulatory approach,” said Piet Van Baeveghem, Secretary General of EL.