ESMA flags prediction markets lacking MiCA authorization

TLDR

Europe's securities regulator says major crypto prediction platforms like Polymarket and Kalshi lack the EU authorization, including potential MiCA licenses, required to sell event contracts in the bloc.

1. ESMA states that most large prediction markets do not hold the authorization generally required to market and sell event contracts in the EU, despite partial geo-blocking.
2. Event contracts can be treated as derivatives, MiCA crypto assets, or gambling products, so unauthorized platforms face bans, ISP blocking, and fragmented national enforcement.
3. Crypto users should watch for tighter EU access restrictions, attempts to obtain MiFID II or MiCA licenses, and whether Malta or other states build a dedicated prediction-market regime.

Deep Dive

1. What ESMA Is Flagging

The European Securities and Markets Authority (ESMA) says the largest prediction platforms, including Polymarket and Kalshi, lack the authorization that is generally required to market and sell event contracts in the EU. This applies whether contracts qualify as financial instruments under MiFID II or as blockchain-based contracts that could fall under MiCA or national gambling law, according to ESMAs latest risk report and related commentary.

ESMA also criticizes platforms for only partially blocking EU users and questions the effectiveness of geographic and VPN restrictions, noting that current measures are largely reactive to incidents of insider trading and manipulation on crypto-settled markets such as Polymarket.

2. How MiCA And Other Rules Bite

ESMA explains that event contracts sit at a regulatory crossroads.

1. Contracts tied to financial instruments are treated as derivatives under MiFID II and typically fall under national binary options bans for retail, effectively blocking retail prediction trading in the EU.
2. Contracts not referencing financial instruments, but tokenized and settled in crypto, can fall under MiCA, which requires authorization for issuers and service providers and MiCA-compliant white papers.
3. Other contracts, such as political or sports markets, may be treated as gambling at the national level, triggering licensing, ISP blocking, or DNS-level bans already seen in Spain and France.

Taken together, ESMAs view is that EU-wide marketing of event contracts without the appropriate MiFID II, MiCA, or gambling authorization is outside the law.

3. What Crypto Users Should Watch Next

There are currently no fully authorized, large-scale prediction markets operating under MiFiD II or MiCA in Europe, and ESMA frames this as an investor-protection gap rather than lack of demand. Malta is exploring a specific framework for prediction markets, but no regime has been enacted yet.

Crypto users and builders should watch three things: national blocking actions against unlicensed platforms, any moves by major prediction venues to seek MiFID II or MiCA authorization, and whether ESMAs stance nudges traditional exchanges to launch compliant prediction-style products that compete with crypto-native platforms.

Conclusion

ESMAs warning puts crypto-linked prediction markets on notice that operating in the EU without MiCA or other authorization is not a gray area but a rising enforcement risk. For crypto users, the near-term impact is likely tighter access and more venue fragmentation in Europe, while the longer-term question is whether fully regulated, MiCA-aligned prediction markets emerge or activity simply shifts to jurisdictions with looser rules.