BlockBeats news, on September 11, the European Securities and Markets Authority (ESMA) released a new risk report stating that major prediction market platforms such as Polymarket and Kalshi currently do not hold the authorizations typically required in the EU to offer event contracts to users.
ESMA notes that the regulatory classification of event contracts depends on the specific product and may be deemed a financial instrument, a crypto-asset subject to the MiCA framework, or fall under member states' gambling regulations. If classified as a financial instrument, it typically constitutes a derivative and may be subject to the EU’s retail restrictions on binary options.
ESMA also questions the current geographic restrictions implemented by Polymarket and Kalshi for the EU region, noting that both platforms restrict only certain member states, and it remains unclear why not all EU countries are included in the restrictions, while also highlighting the risk of users bypassing these geographic limits via VPNs. In July of this year, France requested internet service providers to block Polymarket.
In addition, ESMA warned that the AI hype could become a new channel for risk transmission in the crypto market. If AI investment returns fall short of expectations or technology stocks experience selling pressure, large investors may sell highly liquid risk assets, including crypto assets, to raise cash. ESMA data shows that Bitcoin fell 35% in the first half of 2026, with over $5.5 billion in outflows from U.S. spot Bitcoin ETFs during the same period.
ESMA has previously stated that if event contracts qualify as financial instruments, their distribution in the EU requires an investment firm license and may be subject to the retail ban on binary options.