European Lotteries calls for clearer regulation of prediction markets

By jili tutorial · October 4, 2026

European Lotteries Calls for Clearer Regulation of Prediction Markets: A Comprehensive Guide

Introduction: The Rise of Prediction Markets and the Regulatory Gap

Prediction markets—platforms where users bet on the outcome of future events such as elections, sports results, or economic indicators—have grown rapidly in Europe. These markets often issue “event contracts” with a binary payout: a yes-or-no question about a future event, and the contract pays out a fixed amount if the prediction proves correct. While they attract users seeking speculative opportunities, they also raise serious concerns about consumer protection, financial stability, and regulatory coherence.

In September 2023, the European Lotteries (EL)—the representative body for state and licensed national lotteries across Europe—published a press release urging the European Union and its member states to establish a harmonised regulatory framework for prediction markets. The association warned that the current patchwork of national laws and EU financial regulations leaves dangerous loopholes that could harm consumers and undermine existing safeguards.

This guide expands on EL’s position, explains the regulatory landscape, and offers context on why a unified approach is urgently needed.

What Are Prediction Markets and Event Contracts?

Prediction markets allow participants to trade contracts whose value depends on the outcome of a specific event. The most common type is the event contract:

Binary payout: The contract pays a fixed amount (e.g., €1) if a defined condition is met (yes/no), and zero otherwise.
Example: A contract on “Will candidate X win the French presidential election?” trades at €0.60 if the market believes there is a 60% chance of a yes outcome.
Platforms: Examples include Polymarket, Kalshi, and PredictIt, though many operate outside traditional financial regulation.

These products sit at the intersection of gambling, finance, and technology. Their rapid expansion—aided by blockchain, smart contracts, and tokenisation—has blurred legal boundaries.

Why European Lotteries Is Pushing for Action

Concerns Over Consumer Protection

In its press release of 30 September, EL highlighted several risks:

No mandatory betting limits: Unlike regulated lotteries or sports betting, many prediction markets impose no caps on how much a user can stake.
No cooling-off periods: Players can place bets around the clock, increasing the risk of addiction and impulsive gambling.
Lack of age verification: Many platforms do not enforce minimum age requirements.
Potential for market manipulation: With little oversight, participants could collude to distort prices or exploit inside information.

EL’s Secretary General, Piet Van Baeveghem, stated:

“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.”

Technology Neutrality Is Key

EL stressed that regulation should be technology-neutral. Innovations such as distributed ledgers, smart contracts, and tokenisation should not exempt a product from oversight simply because it uses new tech. The same activity, whether conducted via a traditional bookmaker or a blockchain-based platform, must be treated equally under the law.

The Current Fragmented Regulatory Landscape

EU Financial Regulation (MiFID II) vs. National Gambling Laws

Under the EU’s regulatory framework:

Event contracts that qualify as financial instruments fall under the Markets in Financial Instruments Directive II (MiFID II) and are regulated by financial authorities.
Event contracts that do not qualify are governed by the gambling laws of each member state, because gambling regulation is a national competence.

This creates a fragmented landscape:

In one country, a prediction market may be classified as a financial product; in another, it may be treated as gambling—or neither.
Even if classified as a financial instrument, it may still be subject to national gambling legislation, leading to dual or overlapping regulations.

EL pointed out that this fragmentation complicates oversight and enforcement, making coherent regulation nearly impossible.

ESMA’s Recognition and Its Implications

In July 2023, the European Securities and Markets Authority (ESMA) issued a statement acknowledging that some event contracts may also be subject to national gambling laws. ESMA specifically noted:

Prediction markets with binary outcomes and fixed payouts qualify as restricted financial instruments under MiFID II.
However, those not deemed financial instruments could fall under the upcoming EU Markets in Crypto-Assets (MiCA) regulation.

EL welcomed ESMA’s recognition, stating it “underlines the importance of close coordination between financial and gambling authorities to ensure a coherent regulatory approach.”

National Responses: Blocks, Restrictions, and a Gibraltar Exception

Several EU member states have already taken unilateral action:

France has blocked access to Polymarket and similar platforms.
Netherlands has issued warnings and restrictions.
Spain has also imposed limitations.

In 2023, nine European regulators launched a joint initiative targeting unlicensed prediction market platforms across the continent. Their primary concerns were the same as EL’s: round-the-clock accessibility, no betting limits, no cooling-off periods, and the risk of underage gambling.

However, Gibraltar has taken a different path. Under its Gambling Act 2025, the Gibraltar government published regulations this summer that establish prediction markets as a distinct licensable category. This move creates a formal legal framework for the activity, but it also highlights the inconsistency across Europe.

The Challenges of Harmonisation

Divergent Legal Regimes and Public Policy Priorities

Because gambling regulation remains a national competence, EU member states have vastly different approaches:

Some treat prediction markets as gambling (e.g., France, Netherlands).
Others classify them as financial instruments (e.g., where MiFID II applies).
A few, like Gibraltar, create a dedicated licensing regime.

These differences make it nearly impossible to enforce a single set of rules across borders. A platform based in one jurisdiction can easily serve users in another, evading local laws.

The Need for Coordinated Oversight

EL calls for close coordination between financial and gambling authorities at both national and EU levels. This would involve:

Sharing information on platform activities.
Joint enforcement actions.
Developing common definitions for event contracts and prediction markets.

Without such coordination, consumers remain vulnerable to unregulated operators that exploit regulatory gaps.

Practical Examples and Case Studies

Polymarket: A Blockchain-Based Prediction Market

Polymarket, built on the Polygon blockchain, allows users to trade on election outcomes, sports events, and even COVID-19 statistics. It imposes no KYC (Know Your Customer) checks for small trades, no deposit limits, and no cooling-off periods. European regulators have repeatedly flagged it as a high-risk platform.

Kalshi: A Regulated US Exchange but Unlicensed in Europe

Kalshi is a US-based prediction market that operates under Commodity Futures Trading Commission (CFTC) oversight. However, it does not hold a European gambling or financial license, raising concerns when European users access it.

Gibraltar’s New Licensing Category

In contrast, Gibraltar’s Gambling Act 2025 now allows prediction market operators to apply for a dedicated licence. This provides a legal framework for the activity, but also creates a potential “regulatory haven” if other countries do not follow suit.

Recommendations for a Coherent Regulatory Framework

Drawing from EL’s position and ESMA’s guidance, a harmonised approach should include:

Activity-based classification – Regulation should depend on the nature of the product and the risks it poses, not on the label (e.g., “financial instrument” vs. “bet”) or the underlying technology.
Technology neutrality – Blockchain, smart contracts, and tokenisation should not exempt a product from rules that apply to equivalent traditional products.
Common consumer safeguards – Mandatory betting limits, cooling-off periods, age verification, and transparency requirements should apply across all prediction markets.
Coordinated enforcement – Financial and gambling authorities should work together to monitor cross-border platforms and share intelligence.
Harmonised definitions – The EU should define what constitutes an event contract and a prediction market, to reduce legal uncertainty.

Conclusion: Why This Matters Now

The rapid growth of prediction markets, driven by digital innovation and speculative demand, threatens to outpace the regulatory safeguards that protect European consumers. European Lotteries’ call for a harmonised framework is not just a lobbying effort—it reflects a genuine risk to public welfare and market integrity.

Without clear, coordinated rules, consumers may fall prey to unregulated platforms that offer no protection. With initiatives like Gibraltar’s licensing and ESMA’s recognition, the momentum for change is building. The next step is for the EU and its member states to turn that momentum into binding regulation.

European Lotteries calls for clearer regulation of prediction markets