The European Securities and Markets Authority (ESMA) has questioned the legality of Polymarket and Kalshi operations within the European Union. The regulator noted that both platforms lack the necessary licenses for selling event-based contracts and inconsistently restrict access for users across EU member states.
ESMA highlighted that event contracts may fall under MiFID II regulations if they qualify as financial instruments. In such cases, marketing and sales to retail clients are prohibited. Furthermore, the regulator expressed concerns regarding the effectiveness of geoblocking, as users can bypass restrictions via VPNs.
National regulators have already taken action. In May, Spanish authorities initiated proceedings against both platforms, ordering site blocks. In France, the National Gambling Authority (ANJ) reported that Polymarket saw approximately 205,000 unique visitors in June despite restrictions, leading to a provider-level block on July 16.
ESMA also identified significant risks, including potential insider trading and data manipulation. The report cited a case where a user allegedly earned over $400,000 using non-public information, and another incident involving $37,000 in suspicious bets linked to temperature sensor anomalies at Paris-Charles de Gaulle Airport.
Despite regulatory pressure, both companies continue to pursue European expansion. Kalshi has engaged in talks with foreign regulators, while Polymarket joined the Blockchain for Europe association in September to facilitate dialogue with lawmakers.
