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Polymarket Lobbies EU and UK Regulators for Financial Services Status: A Comprehensive Guide

By jili tutorial · September 23, 2026

Polymarket Lobbies EU and UK Regulators for Financial Services Status: A Comprehensive Guide

Overview: The Regulatory Battle for Prediction Markets

In September 2026, the Financial Times reported that Polymarket, a New York-based prediction market platform valued at over $20 billion, is actively lobbying European and UK authorities to be classified and regulated as a financial services firm rather than a gambling operator. This move comes after a year in which prediction market platforms faced blocking, fines, and geo-fencing by European gambling regulators. The company argues that its contracts behave like derivatives, not bets, and should therefore fall under financial services frameworks such as MiFID II in the EU. However, gaining financial status does not guarantee access to retail markets, as EU and UK rules already ban binary options for retail investors. This guide unpacks the regulatory landscape, the arguments on both sides, and what the outcome could mean for operators and users.

Background: The Growing Clash Between Prediction Markets and Gambling Laws

What Are Prediction Markets?

Prediction markets allow users to trade contracts whose payouts depend on the outcome of future events—ranging from election results and sports scores to economic indicators like inflation. Platforms like Polymarket and Kalshi have grown rapidly, but their legal status varies widely by jurisdiction. In the United States, the Commodity Futures Trading Commission (CFTC) oversees prediction markets as financial derivatives, though several states contest that position. In Europe, the situation is fragmented and increasingly hostile.

The 2026 Crackdown by European Gambling Regulators

Throughout 2026, prediction market platforms have been blocked, fined, and geo-fenced by national gambling regulators across Europe. On 17 June, nine European gambling regulators signed a joint declaration agreeing to act together against platforms operating without a local licence. The signatories included Belgium, France, Germany, Italy, the Netherlands, Poland, Portugal, Spain, and Switzerland. France’s ANJ explicitly stated that platforms like Polymarket are not authorised in France and constitute illegal gambling services. Neither Polymarket nor Kalshi holds a gambling licence anywhere in the European Union.

What Polymarket Is Asking For: A Shift from Gambling to Financial Regulation

Meetings with Regulators and Key Arguments

According to the Financial Times, Polymarket is meeting regulators in London, Brussels, and across the EU. It is engaging with the European Securities and Markets Authority (ESMA) and the European Commission, and has already met some national regulators. The core argument is that its contracts behave like derivatives rather than bets, and therefore should be subject to MiFID (Markets in Financial Instruments Directive)—the EU’s framework for financial services firms—rather than country-by-country gambling statutes.

Polymarket’s pitch is that its event contracts are structurally similar to binary options, which are already treated as financial instruments in many jurisdictions. The company says it is committed to engaging early and openly with policymakers as it expands.

Why This Strategy Worked in the United States

The same argument has found traction in the United States, where the CFTC oversees prediction markets as financial derivatives. While some states (e.g., New Jersey, California) are contesting this position through legal challenges, the federal framework provides a more uniform path than the patchwork of European gambling laws. Polymarket is hoping to replicate this model in Europe, where a single financial services licence could theoretically grant access to the entire EU market.

Why the Financial Route Is Not a Clear Escape

ESMA’s Position: Binary Options and the Retail Ban

Even if Polymarket wins the argument that its contracts are financial instruments, it does not automatically open the European retail market. In a statement on 3 July 2026, ESMA clarified that an event contract paying a fixed amount or nothing qualifies as a binary option where the underlying question relates to an asset class covered by MiFID II. Since 2018, binary options have been banned from sale to retail investors across the entire EU under ESMA’s product intervention measures.

A platform accepted as a financial services firm would therefore need MiFID II authorisation, but its retail offer would still run into that restriction. ESMA’s list of relevant asset classes includes interest rates, currencies, commodity prices, financial indices, and climatic and economic variables such as inflation. However, sport and political outcomes—which generate most of the revenue for Polymarket and its rival Kalshi—appear nowhere in that list. This means that contracts based on, say, US presidential elections or football matches would likely fall outside the scope of MiFID II altogether.

What Happens If the Underlying Event Is Not a Financial Asset?

If the underlying question does not relate to a MiFID II asset class, the contract may not be considered a financial instrument at all. In that case, the product would revert to gambling regulation, leaving Polymarket back where it started. The company’s lobbying thus faces a twofold challenge: first, to persuade regulators that its contracts are financial instruments; second, to argue that the retail ban on binary options should not apply—or that its products are not binary options in the regulatory sense.

Insider Trading Concerns

ESMA appears reluctant to loosen the rules. In its second risk monitoring report of 2026, the regulator warned that prediction markets are “rife with insider trading.” The report includes a dedicated analysis of prediction markets from a securities market perspective, highlighting risks such as market manipulation, lack of transparency, and the potential for misuse of non-public information.

The UK Splits the Same Way

Financial Conduct Authority (FCA) Perimeter

In the United Kingdom, prediction market contracts referencing financial or certain climatic events sit inside the Financial Conduct Authority’s (FCA) regulatory perimeter. The FCA’s current view is that the financial products it has seen are binary options, which have been banned from sale to UK retail consumers since 2019. In a letter to HM Treasury in April 2026, the FCA stated that those products therefore remain subject to the ban. It added that it is considering whether further work is needed on access to them or on clarifying the perimeter.

Everything Else Falls to the Gambling Commission

For contracts that do not involve financial or climatic events (e.g., sports or politics), the UK Gambling Commission takes precedence. In February 2026, the Commission stated that, depending on the business model, a prediction market offered in Great Britain would likely fall within the definition of a betting intermediary. It warned that operators not licensed in Great Britain should take steps to ensure they are not targeting or transacting with British consumers.

A Two-Regulator Problem

The implication for any operator is clear: every prediction market now needs simultaneous answers from two regulators in each European country—one for financial instruments and one for gambling. This dual-layered oversight creates significant compliance complexity and legal uncertainty.

What European Gambling Regulators Have Already Done

The Joint Declaration of June 2026

Nine European gambling regulators signed a joint declaration on 17 June, agreeing to coordinate enforcement against platforms operating without a local licence. The signatories—Belgium, France, Germany, Italy, the Netherlands, Poland, Portugal, Spain, and Switzerland—committed to sharing information and taking joint actions such as blocking payments and domain names.

National Actions: France Leads the Way

France’s ANJ has been particularly vocal, declaring that prediction market platforms are not authorised in France and count as illegal gambling services. The ANJ has the power to order internet service providers to block unlicensed sites, and has already used this authority against several crypto-based betting platforms.

Why Gambling Licences Are Not an Easy Alternative

Polymarket has never held a gambling licence in the EU. Obtaining one would require adapting its business model to comply with national gambling laws, which typically mandate local servers, responsible gambling measures, and tax contributions. Furthermore, many EU countries have a state monopoly on gambling (e.g., Nordic countries) or impose strict limits on the types of bets allowed. For a platform built on crypto settlements and global event markets, the licensing burden is high.

What It Means for Operators

Scenario 1: Polymarket Wins the Financial Argument

If ESMA or the UK Treasury accepts that prediction market contracts are financial derivatives, an unlicensed, crypto-settled platform could potentially reach European customers through a financial route—subject to MiFID II authorisation and the retail binary options ban. This would likely force Polymarket (and similar platforms) to restrict retail access to only certain contract types, or to serve only professional/eligible counterparties. The retail ban would remain a major barrier.

Scenario 2: Polymarket Loses the Financial Argument

If regulators decide that prediction markets are not financial instruments, the only way to operate in Europe is via a national gambling licence. Polymarket has never held one in the EU, and obtaining multiple licences across different jurisdictions would be costly and time-consuming. It would also require changing the platform’s underlying mechanics to comply with gambling-specific rules (e.g., pre-commitment limits, anti-money laundering checks, and tax reporting).

The Rise of Licensed European Operators

Meanwhile, licensed European gambling operators have been treating event contracts as a possible extension of existing sportsbook activity. These companies already hold gambling licences and can add prediction markets to their product suite relatively easily—without having to argue about financial definitions. If Polymarket fails to secure financial status, it may be outflanked by local incumbents who can offer similar products legally.

Key Takeaways

Conclusion

Polymarket’s lobbying effort represents a strategic attempt to avoid the patchwork of European gambling laws by framing its product as a financial instrument. While the argument has worked in the US, European regulators appear sceptical. ESMA has already flagged insider trading risks and maintains the retail binary options ban. The UK splits its regulatory approach along similar lines. For now, any prediction market operator in Europe must navigate a two-regulator maze—and Polymarket’s next moves will decide whether the financial route offers a way through or simply another dead end.