Polymarket's European Push: Can Prediction Markets Shed Their Gambling Label?

By jili tutorial · September 23, 2026

Polymarket’s European Push: Can Prediction Markets Shed Their Gambling Label?

Executive Summary

Polymarket, one of the world’s two largest prediction markets alongside rival Kalshi, is reportedly launching an intensive lobbying campaign across the UK and Europe. The goal? To convince regulators that its products should be classified as financial services—not gambling. After being blocked or evicted from several European nations including Italy, the Netherlands, and France, the company now seeks a regulatory pathway that would legitimize its operations and unlock a potentially massive taxable revenue stream for cash-strapped European governments.

This article provides a comprehensive analysis of Polymarket’s strategy, the regulatory landscape it faces, the key obstacles, and the potential outcomes across different European jurisdictions.

1. The Core Conflict: Financial Service or Gambling?

The Regulatory Split

At its heart, the debate over prediction markets hinges on a fundamental question: Are event contracts investment products or betting mechanisms?

Gambling regulators across Europe have consistently viewed prediction markets as unlicensed gambling operations. These markets allow users to wager on outcomes ranging from election results to weather events—activities that fall squarely under gambling definitions in most jurisdictions.
Financial regulators like the US Commodity Futures Trading Commission (CFTC) have taken a more nuanced view, treating certain event contracts as derivatives or financial instruments that fall under their supervision.

Polymarket is betting (pun intended) that European financial regulators will adopt a similar approach to the CFTC, creating a regulated avenue for its products.

The European Rejection So Far

Polymarket has already been formally excluded from several European markets:

Country	Status	Reason
Italy	Blocked	Classified as illegal gambling
Netherlands	Blocked	Classified as unlicensed betting
France	Blocked	Classified as gambling
UK	Not yet blocked	Status undetermined

This pattern reveals a deep-seated regulatory skepticism that Polymarket must overcome.

2. Polymarket’s Lobbying Strategy: Target Audience and Methods

Who They Are Meeting

According to the Financial Times, Polymarket has been engaging with:

UK regulators: Likely the Financial Conduct Authority (FCA) in London
EU bodies: The European Commission and the European Securities and Markets Authority (ESMA) in Brussels
National regulators: Across multiple European Union member states

The Strategic Goal

Polymarket needs to achieve two simultaneous objectives:

Bypass gambling regulators by arguing that event contracts are not “betting” under existing gambling legislation
Convince financial regulators to classify these products as financial instruments or derivatives

This is a delicate balancing act. If financial regulators accept the argument, Polymarket gains legitimacy. But if gambling regulators maintain their stance, the company remains effectively banned.

The ESMA Position: Mixed Signals

ESMA, the EU’s securities watchdog, has been meeting with Polymarket since June. However, its public statements suggest division:

“Event contracts exist for a wide variety of event questions” — ESMA noted in July.

Some of these contracts can be classified as financial instruments or derivatives, but ESMA acknowledged that many cannot. The regulator also flagged significant concerns:

Investor protection risks
Market integrity issues
Potential for insider trading

This ambivalence makes it unclear whether ESMA will ultimately support or reject Polymarket’s classification.

3. The Political and Economic Landscape

Government Reluctance: The Anti-Gambling Tide

European governments are currently doubling down on gambling regulation, not loosening it:

Netherlands & Belgium: Gambling advertising bans are now in effect
UK: The government is hiking taxes on the gambling industry and seeking to reduce its high street presence

Politicians are acutely aware of public health concerns around gambling, and adding another gambling-adjacent industry would be politically unpopular. The term “prediction market” may sound less harmful than “betting exchange,” but regulators are seeing through the branding.

The Economic Counterargument

However, European economies are desperate for growth and revenue:

UK government borrowing hit £18.3 billion in August, putting pressure on the upcoming budget
EU spending plans exceed €2 trillion for the next budget cycle

Meanwhile, prediction market trading in the US has reached approximately $24 billion (£18 billion) per month according to Forbes. This represents substantial taxable revenue that European governments are currently missing out on.

The argument goes: if properly regulated and taxed, prediction markets could contribute significantly to public finances without the social harms associated with unregulated operators.

4. What Stands in Polymarket’s Way?

US Legal Challenges as a Precedent

Even in the United States, where prediction markets have found more regulatory acceptance, legal battles continue:

New Jersey has petitioned the US Supreme Court to clarify whether event contracts are federally regulated financial products or state-regulated gambling
New York Governor Kathy Hochul and Attorney General Letitia James have filed a $30 billion lawsuit against Kalshi for bypassing state conditions on sports betting

These US cases will set important precedents that European regulators will likely follow closely.

The UK’s Undetermined Status

The UK remains one of Europe’s most significant battlegrounds because it has not yet formally classified prediction markets as gambling. Key developments include:

The Gambling Commission has only briefly referenced prediction markets, noting it has “fielded enquiries on their emergence”
An initial determination stated: “Commercial products meeting the definition of gambling under UK legislation must be licensed and regulated by the Gambling Commission. Spread betting is an exception which is regulated by the Financial Conduct Authority.”
The FCA has been consulting on “expanding consumer access to investments,” including whether to open up “speculative products”—a category that could include prediction markets

However, the Gambling Commission has also warned: “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.”

This creates a contradictory picture: financial regulators appear open to discussion, while gambling regulators have already signaled their view.

The Gibraltar and Malta Factor

Two Mediterranean jurisdictions are emerging as potential regulatory testbeds:

Gibraltar:

Licensed ADI Predictstreet as the first betting intermediary under its new Gambling Act
Created the world’s first dedicated regulatory regime for prediction markets, with specific licensing and supervision orders for event contracts
This is part of a wider overhaul of Gibraltar’s gambling legislation

Malta:

Taking a more cautious approach
Actively exploring a statutory framework for prediction markets
Acknowledging European concerns while arguing that products should be assessed individually rather than automatically treated as conventional betting services

Malta is a particularly significant prize. As an EU member state and arguably the world’s largest hub for reputable gambling licensing, a favorable ruling from Malta could serve as a template for other EU nations.

5. The Broader Industry Implications

Why Europe Matters for Survival

The expansion beyond US shores is not optional for Polymarket and Kalshi—it is essential for sustaining their multibillion-dollar valuations and hyper-growth cycles. Without access to European markets, these companies face a ceiling on their total addressable market.

A Historical Parallel: The iGaming Industry

The article notes that the future of prediction markets “mirrors the early foundation of the iGaming sector.” This comparison is instructive:

iGaming faced similar regulatory battles in the early 2000s, with many countries initially classifying it as illegal gambling
Over time, jurisdictions like Malta, Gibraltar, and the UK created regulated frameworks that allowed the industry to flourish
The iGaming sector is now worth hundreds of billions annually and contributes significant tax revenue

Prediction markets may follow a similar trajectory—but only if they can overcome the initial regulatory resistance.

What Success Would Look Like

If Polymarket succeeds, the roadmap would likely involve:

A favorable ruling from a higher European court that overrides national gambling classifications
A dedicated regulatory framework established in at least one EU member state (probably Malta)
Adoption of that framework by the EU as a whole or by individual member states
Creation of a licensed, tax-paying industry that can operate openly across Europe

6. Key Takeaways for Industry Observers

Polymarket faces an uphill battle. European gambling regulators are entrenched and politically backed by anti-gambling sentiment.
Economic pressures may work in Polymarket’s favor. Cash-strapped governments may eventually see the tax revenue potential.
The UK is the most important swing state. If the FCA can carve out an exception for prediction markets, it could create a domino effect across Europe.
Malta and Gibraltar are the early movers. Their regulatory experiments will be closely watched by the rest of Europe.
US legal developments will influence European decisions. The Supreme Court case on event contracts could set a global precedent.
Timing matters. Governments that are currently tightening gambling laws may not be receptive to new gambling-adjacent industries—but economic conditions could change that calculus.

Conclusion: A Long Road Ahead

Polymarket’s European ambitions are ambitious but not impossible. The company has identified the right regulatory targets and is deploying significant lobbying resources. However, the political and regulatory obstacles are formidable, and success is far from guaranteed.

The outcome will depend on whether European governments can be convinced that prediction markets are a form of financial speculation—no different from trading futures or derivatives—rather than a sophisticated form of gambling. If they succeed, the industry could unlock billions in revenue and reshape the European financial landscape. If they fail, prediction markets will remain confined to the US market and a handful of progressive jurisdictions.

For now, all eyes are on London, Brussels, and the courts.

Want to learn more about the future of prediction markets? The Global Prediction Market Forum is taking place in Lisbon on October 1. Visit sbcevents.com/global-prediction-markets-forum for details.