ESMA flags prediction markets lacking MiCA authorization

TLDR

ESMA has warned that major prediction markets lack required EU authorization under MiCA and related rules, putting both platforms and EU users under regulatory risk.

1. ESMA says large platforms such as Polymarket and Kalshi do not hold the authorization generally needed to market and sell event contracts in the EU.
2. The regulator flags insider trading, manipulation and retail harm, and notes some countries already blocking access to these platforms.
3. Next steps likely include more national enforcement, pressure for MiCA-compliant licensing, and possibly new EU frameworks for crypto-settled prediction markets.

Deep Dive

1. What ESMA Actually Flagged

In its latest risk report, the European Securities and Markets Authority (ESMA) states that the largest prediction platforms, including Polymarket and Kalshi, lack the EU authorization that is generally required to market and sell event contracts across the bloc. ESMA explains that these contracts can be treated as financial instruments under MiFID II, as crypto assets under MiCA, or as gambling products under national law, and that in all cases the marketing and sale in the EU typically require authorization that these platforms do not hold. Where event contracts qualify as financial instruments, they are usually classed as derivatives subject to retail bans on binary options, effectively blocking them from EU retail investors.ESMA report summary

2. Conduct Risks And Existing National Actions

ESMA devotes a separate section to prediction markets, calling them rife with inside trading and highlighting cases where pseudonymous wallets earned seven-figure profits by betting on military strikes and political events using non-public information.Risk monitor discussion It argues platform controls against insider trading, spoofing and wash trading are largely reactive and that crypto-based settlement makes manipulation harder to spot. National regulators have already moved: France ordered internet providers to block Polymarket, Spain imposed DNS-level blocks on Polymarket and Kalshi, and several other countries have restricted access based on gambling or securities rules.National enforcement overview

3. What To Watch Under MiCA

ESMAs statement is not an immediate EU-wide ban, but it clearly raises the odds of future enforcement or coordinated action. The report questions why platforms only geo-block some member states and doubts the effectiveness of VPN bans, signaling that partial restrictions will not satisfy regulators.Geo-blocking critique At the same time, Malta is exploring a dedicated prediction-market framework, and MiCA is gradually coming into force, suggesting a path where EU-compliant, licensed prediction venues could emerge while unlicensed ones face more blocks. For crypto markets, further integration of prediction products into regulated exchanges or tokenized securities platforms will depend on how MiCA and national gambling laws are applied to event contracts.

Conclusion

ESMAs warning does not shut down prediction markets, but it clearly frames most current activity targeting EU users as unauthorized and high risk. For crypto participants, the key takeaway is that MiCA-style licensing and stronger conduct controls are becoming prerequisites for any EU-facing prediction market, and national regulators are already willing to block non-compliant platforms.