Prediction markets have been one of finance's fastest-growing segments, with platforms like Polymarket processing billions in wagers on elections, economic decisions, and global events. For their European users, the picture just got much clearer — and considerably bleaker.
On July 3, the European Securities and Markets Authority (ESMA) issued a formal warning: most event contracts offered by prediction markets — binary-outcome instruments with fixed payouts — qualify as binary options under MiFID II. Binary options for retail investors have been banned across the EU since 2018.
The logic is straightforward. If a contract pays either a fixed amount or nothing depending on a yes/no outcome, ESMA considers it a binary option, full stop. Calling it an "event contract" or a "prediction market instrument" doesn't change the classification. The regulator specifically warned that the label a firm puts on a product doesn't override the product's actual characteristics under the law.
There is no transition period — no warning shot with a grace period attached. The ban already exists. Right now, there is not a single licensed prediction market platform serving retail clients in the EU. Even platforms targeting only professional or institutional clients must obtain MiFID II authorization to operate in Europe, a bar that currently no major prediction market has cleared. Polymarket, Kalshi, and similar platforms now face immediate compliance risk in all 27 EU member states.
This stands in sharp contrast to the US, where the CFTC, federal courts, and state regulators are still arguing about how and by whom prediction markets should be governed. In the EU, the answer is already in the books. Global platforms face a clear choice: design a fundamentally different product for the European market, or exit it.
