Polymarket reportedly steps up lobbying in Europe
The operator aims to convince regulators like the ESMA that its offerings should be seen as financial products rather than illegal gambling.
Belgium.- With the US currently a legal battleground between prediction market platforms and state regulators, Polymarket is reportedly taking a greater interest in fighting its case in Europe. Reports suggest that it’s stepped up lobbying efforts in a bid to convince regulators in the UK and Europe to classify its products as financial services rather than gambling as it seeks a route into jurisdictions where it has faced significant resistance.
Polymarket has been blocked in many European jurisdictions, most recently in Denmark and Lithuania. In August, the Serie A team SS Lazio terminated its sponsorship deal with the prediction market platform after it was banned in Italy. The Netherlands, France and Belgium have also taken action against the operator.
In June, nine European regulators announced a joint initiative against prediction markets, warning consumers over player protection and market integrity risks. With the notable exception of Gibraltar, which granted FIFA partner ADI Predictstreet a gambling licence in time for the World Cup, European regulators have tended to view prediction market platforms as illegal gambling operators – a view shared by many state regulators in the US.
Polymarket lobbying in Europe
However, the Financial Times reports that Polymarket is attempting to persuade European authorities to adopt an approach more like that of the US Commodity Futures Trading Commission (CFTC), which treats certain event contracts as financial products. The newspaper reports that Polymarket representatives have held discussions with regulators in London and Brussels. That reportedly includes conversations with the UK’s Financial Conduct Authority (FCA) and the European Securities and Markets Authority (ESMA), as well as other national regulators across the European Union.
The company faces an uphill battle, however. The argument that its event contract offerings fall outside gambling regulation and should be overseen by financial regulators could prove difficult at a time when many European governments are focused on reducing gambling-related harm. Several countries in Europe have been introducing tougher restrictions on the regulated gambling sector while also trying to tackle illegal offerings.
Nevertheless, governments across Europe are also searching for new sources of revenue. Supporters of prediction markets argue that the sector could generate significant taxable proceeds if a viable regulatory framework is found.
It’s reported that Polymarket has been in talks with ESMA since June. In July, the regulator said that “event contracts exist for a wide variety of event questions”, some of which could potentially qualify as financial instruments or derivatives in the EU, while others would not. It cautioned that event markets structured as yes-or-no contracts with fixed payouts may fall under prohibitions on the marketing and sale of binary options to retail customers. It had previously warned that there are a “range of investor protection and market integrity concerns” associated with prediction markets, including the possibility of insider trading.
Legal status yet to be defined
In the US, the issue is expected to reach the Supreme Court after New Jersey filed a petition seeking clarification over the legal status of event contracts. Separately, New York Governor Kathy Hochul and Attorney General Letitia James have launched a $30bn lawsuit against Kalshi, alleging that the company circumvented state requirements governing sports betting markets.
The UK has so far formally classified or blocked prediction market operators, although the Gambling Commission has warned prediction platforms not to target the country. Earlier this year, the regulator said that if a prediction market operator were to launch in Great Britain, it does “not believe they would be able to classify themselves as non-gambling products”.
The FCA, for its part, has been examining the possibility of broadening retail investor access to investment products, including consideration of whether consumers should be permitted greater access to “speculative products”. In theory, prediction markets could fall within that category.
Gibraltar remains the only European jurisdiction to have licensed prediction markets so far, although Malta’s government is exploring the creation of a statutory framework for prediction markets.
