iGB: Can prediction markets crack Europe’s regulatory wall?

By Martin Bjoerck (iGB)

As prediction markets boom in the US, European regulators move swiftly to block them, exposing a widening a transatlantic divide over whether they are considered financial innovation or simply unlicensed gambling.

In 2024, as Americans placed billions of dollars on the outcome of their presidential election, a curious new financial spectacle unfolded online. On prediction market platform Polymarket, traders wagered not through traditional bets but through contracts priced like financial assets, reflecting the crowd’s collective view of Donald Trump’s electoral chances. The market proved uncannily prescient, correctly forecasting the result before many pollsters did. 

In the United States, such platforms have become a fashionable intersection of finance, technology and gambling. In Europe, however, regulators have reacted rather differently. While the American debate centres on whether prediction markets should be regulated as derivatives or sports betting, many European authorities have adopted a far simpler position: block them, as they defy gambling rules and requirements.

The clash reveals not merely a regulatory divergence but a deeper philosophical difference about what prediction markets are—and whether Europe even wants them. 

A product with appeal 

Prediction markets are, in essence, financial exchanges for real-world events. Participants buy and sell contracts tied to specific outcomes. If the outcome ultimately proves correct, the contract settles with a win, if not, it expires worthless.  

Crucially, the contracts can be traded before the event is resolved. For instance if a trader buys at €0.48 and the price later rises to €0.62, they can sell early and lock in profit. This feature makes prediction markets behave less like traditional betting and more like derivatives trading. The model has an unmistakable appeal. Markets can be created for almost any question, but regulators see something else: a gambling product wearing the clothes of financial innovation. 

Europe shuts the door 

Across much of Europe, the official stance is unambiguous. Prediction markets are treated either as illegal gambling or as unlicensed financial instruments. France is a case in point. The country’s gambling regulator, the Autorité Nationale des Jeux (ANJ), investigated prominent operator Polymarket in 2024 and concluded that its services could constitute unauthorised gambling. The platform subsequently geoblocked French users from placing trades. 

In a statement issued earlier this year, the regulator warned that prediction market platforms “are not authorised in France and are considered illegal gambling services.” It added that these sites displayed “addictive characteristics like those found in online gambling – but amplified by the absence of the protective mechanisms that exist in the legal gambling market”. The ANJ also cautioned that such platforms operate around the clock and often lack safeguards such as spending limits or identity verification. 

Other European jurisdictions have taken similar steps. Germany, Belgium, Portugal, Switzerland, Romania, the Netherlands and Poland have all blocked access to Polymarket, arguing that the platform offers gambling services without a licence. 

The Dutch precedent 

The Netherlands illustrates how existing gambling law can be used to shut the door on the prediction markets sector. According to Justin Franssen, a lawyer at Franssen Tolboom, the Dutch regulator’s reasoning is straightforward. “First, prediction markets are considered games of chance. Second, as a product category they are, in principle, unlicensable,” he explains. 

Under Dutch law, licensed betting is effectively limited to sports and horse racing. Markets on elections, weather events or other “special markets” fall outside the permitted scope. Franssen notes that even the Remote Gambling Act’s explanatory memorandum explicitly rules out such bets. “It even explicitly says that betting on events such as the next President of the United States will not be permitted,” he says. 

The KSA regulator reinforced this interpretation earlier this year by issuing a cease-and-desist order against Polymarket, and threatening it with an €840,000 ($994,147) fine. Despite occasional political curiosity—one television personality’s claim to have profited from the platform even triggered parliamentary questions—Franssen says there is little industry momentum pushing for regulatory change. “To be honest, if it’s not on our radar as lawyers, it probably doesn’t really exist in a meaningful way yet.” 

Demand persists beneath the surface 

Yet blocking the platforms does not necessarily eliminate them. Ismail Vali, founder and former CEO of Yield Sec, and now the President of RegTech firm Gaming Compliance International (GCI), argues that traffic and engagement data suggests prediction markets still attract European users despite official bans. 

“Officially, yes, they might be blocked,” he says. “But, the traffic and engagement data across all of a platform’s access points tells a different story. We still see significant user traffic and engagement from jurisdictions where these platforms are supposedly blacklisted or blocked.” 

The reason is simple: online enforcement is rarely perfect. Operators can deploy mirror domains, redirect links, and alternative entry points promoted through affiliates, influencers or social media. “If a regulator simply blocks one website that doesn’t mean the operator stops doing business in that jurisdiction,” Vali explains. “Operators can simply create mirrors and redirects and do this as a business as usual strategy.” 

Demand for prediction markets in Europe is ‘genuine’

The result is a familiar cat-and-mouse game between regulators and offshore platforms. Vali believes demand for the product is genuine, particularly among younger users attracted by the idea of “trading the news”. Prediction markets have also benefited from geopolitical drama, with trading surging during recent international crises. 

Another factor is engagement. According to GCI’s monitoring and research, users revisit prediction market positions far more frequently than traditional bets. “On average, users return to check their positions about 15 times per hour during the first day after placing a trade,” Vali says. “We have never seen engagement levels like that in the traditional online gaming sector.” 

Illegal gambling operators have not overlooked this level of activity. Many have already incorporated prediction-style products into broader betting platforms, for the cross sell appeal that predictions, combined with other traditional gambling products, can provide them – and the positive impact upon ARPU (average revenue per user) it brings, Vali explains. 

“In 2024, prediction markets accounted for about 7.9% of illegal sports betting revenue. We expect that figure to reach at least 10% in 2025. In the legal sector, the share was much smaller—about 0.22% of legal sports betting revenue in 2024. But that could grow to 0.5% or even 1% by the end of 2025.” 

Can prediction markets be ‘Germanised’ to fit its definition of a financial product?

Despite Europe’s generally restrictive stance, some jurisdictions appear marginally more open—at least conceptually—to experimentation. Germany is one such example, although the The Joint Gambling Authority of the German Federal States (GGL) strongly warns against participating betting activity such as what is offered on the Polymarket platform, because it is illegal under current German law. 

Under the country’s Interstate Treaty on Gambling, the national regulator has clarified that betting events must appear in an official programme. That requirement effectively rules out most prediction market questions. Yet Wulf Hambach, a German lawyer at Hambach & Hambach, believes there may still be regulatory space if the product is framed differently. “The room could be in the direction of financial options trading, for example under the supervision of BaFin, the German financial authority,” he says. 

In other words, the path forward might not lie within gambling regulation at all but within financial markets law, similar to the US. However, such an approach would require regulators to accept that prediction contracts resemble derivatives rather than wagers. “At the moment there is no such product on the market in Germany,” Hambach notes. “But I am quite sure that some setups are currently being explored.” 

Even then, the model would need adaptating. “You cannot simply copy the Polymarket model one-to-one into Germany,” he says. It would need to be “Germanised” to fit the country’s legal definitions of gambling and financial products. 

No European equivalent to the CFTC

Europe’s patchwork regulation further complicates matters. Unlike the United States, where federal regulators such as the Commodity Futures Trading Commission (CFTC) claim jurisdiction over event contracts, Europe has no such single authority governing prediction markets. 

Former Entain chief executive Gavin Isaacs tells iGB this fragmentation makes the issue inherently difficult, because no one country that does it the same way. “It’s very complicated,” he remarks. In the United States, prediction markets have triggered a turf war between federal derivatives regulators and state gambling authorities. Isaacs believes the dispute may ultimately reach the Supreme Court. 

Europe could face its own institutional questions. Financial supervisors such as the European Securities and Markets Authority oversee derivatives markets, while gambling regulators control betting. Determining where prediction markets belong could prove contentious. “The states have always kept control very well,” Isaacs says of the American system—an observation that applies equally to European governments’ determination to guard their gambling regimes. 

Ghost of Betfair’s past

To veterans of the European betting industry, the debate feels oddly familiar. Mark Davies, a member of the founding team behind Betfair, views the current excitement around prediction markets with a sense of déjà vu. “It seems to me to be pretty much identical to a whole load of businesses which launched in May and June 2000, adopting pretty much the exact same methodology as InTrade,” he tells iGB. 

Indeed, Betfair’s betting exchange introduced the same core mechanics decades ago: users trading positions against one another rather than betting against a bookmaker. The regulatory debates that followed were long and contentious.

“The regulatory questions that are being raised are identical to the ones that were being raised back then,” Davies observes. “I haven’t seen a single thing said about prediction markets that didn’t come up at the time.” His conclusion is simple: countries that once viewed betting exchanges as illegal are likely to reach the same verdict about prediction markets. 

Davies also questions whether the product is truly revolutionary. Flutter, Betfair’s parent company, already possesses a mature exchange platform that could theoretically host such markets if regulators allowed it. “They have the strongest version of the product in their portfolio,” he says. 

The investment illusion 

For European regulators, another concern lies in how prediction markets are marketed. The ANJ warns that many users perceive them not as gambling but as investment opportunities—an impression reinforced by comparisons with cryptocurrency trading. That perception can create what psychologists call an “illusion of competence”, encouraging users to believe their analytical skills give them an edge. 

The platforms’ constant availability, lack of deposit limits and viral social-media promotion may further intensify engagement. In extreme cases, regulators also worry about the ethical implications of markets on sensitive topics such as political violence or geopolitical crises. Critics argue that when financial incentives are tied to such outcomes, prediction markets risk encouraging harmful behaviour—or at least appearing to do so. 

Will Europe change its mind on prediction markets? 

For now, Europe’s regulatory answer to prediction markets remains largely negative. But history suggests the debate may not end there. Online gambling itself was once widely prohibited across the continent before regulators gradually shifted toward licensing frameworks designed to control the sector. Hambach believes a similar evolution is possible. “Regulators often say that if something can be properly controlled, it is better to license it than to ban it. And I agree. Especially when bans tend not to work in practice.” he notes.

Vali agrees that ignoring the phenomenon may prove difficult as the market grows. Prediction markets already account for a noticeable share of illegal betting revenue and could expand further if mainstream operators embrace the model. The fundamental question is how Europe chooses to define the product. If prediction markets are treated as gambling, most will remain illegal under existing rules. If they are classified as financial derivatives, an entirely different regulatory architecture could emerge. Either way, regulators on the continent will eventually have to make a clear decision. 

Read the whole article also on iGB.