Polymarket Lobbies European Regulators For Financial Services Status

Polymarket has stepped up lobbying efforts across Europe as it seeks to convince regulators that its prediction market contracts should be treated as financial products rather than gambling.

The company has held discussions with regulators in the UK and European Union, including the European Securities and Markets Authority (ESMA) and European Commission, as it explores potential routes to licensing.

Polymarket argues that its event contracts have characteristics comparable to derivatives and could therefore fall within the EU’s Markets in Financial Instruments Directive (MiFID) framework.

However, classification as a financial services business would not necessarily provide unrestricted access to European consumers. Existing rules surrounding binary options create a significant regulatory obstacle for prediction contracts that qualify as financial instruments.

Polymarket Targets Financial Services Route

Polymarket’s lobbying campaign comes as prediction markets face increased scrutiny from European gambling regulators.

The company is reportedly engaging with authorities in London, Brussels and individual EU member states, seeking a regulatory structure that would allow it to expand legally across Europe.

Its position is that prediction contracts should be considered financial instruments rather than conventional bets, potentially bringing qualifying products within MiFID rules.

The approach differs from the position taken by several European gambling authorities. In June, regulators from nine European jurisdictions announced coordinated action against unlicensed prediction market platforms.

France previously blocked Polymarket after its gambling regulator concluded that its services constituted unauthorised gambling. In Italy, Polymarket and Serie A club Lazio mutually terminated a sponsorship agreement after the platform was included on the country’s list of prohibited gambling websites.

Polymarket has also joined Blockchain for Europe, an organisation that works with policymakers on regulatory frameworks for blockchain-based businesses, as it increases its engagement with European authorities.

Financial Classification Would Not Guarantee Retail Access

Securing recognition as a financial services company would not automatically resolve Polymarket’s regulatory challenges.

ESMA clarified in July that some event contracts can qualify as financial instruments depending on their underlying subject. Contracts linked to areas including equities, currencies, commodities, interest rates and certain economic or climatic variables can fall within MiFID II and be treated as derivatives.

However, binary options have been prohibited from sale to retail investors across the EU since 2018. Prediction contracts that qualify as financial instruments and provide a fixed payout based on a binary outcome could therefore remain unavailable to ordinary consumers even if Polymarket succeeds in moving them within the financial regulatory framework.

Sports and political outcomes present another challenge because they do not necessarily fall within the categories of underlying assets covered by MiFID II.

This creates a potentially fragmented regulatory position in which different contracts offered by the same prediction market platform could fall under different rules.

UK Divides Prediction Markets Between FCA And Gambling Commission

A similar distinction exists in Britain.

The Financial Conduct Authority considers contracts relating to financial or certain climatic events to fall within its regulatory perimeter. Financial prediction products structured as binary options are prohibited from sale to UK retail consumers.

Prediction markets based on non-financial events, including sports and political outcomes, can instead fall within the remit of the Gambling Commission.

The Gambling Commission has previously indicated that, depending on the business model, a prediction market offered in Great Britain could meet the definition of a betting intermediary. Operators without the appropriate British licence are expected to prevent themselves from targeting or transacting with consumers in the country.

The FCA has said it will consider whether further work is required on access to prediction market products or whether the regulatory boundary needs additional clarification.

Polymarket’s lobbying campaign therefore centres on more than whether prediction markets should be classified as gambling. Even if European regulators accept that some of its contracts qualify as financial instruments, existing restrictions on binary options and the distinction between financial and non-financial events would remain significant barriers to widespread retail access.

The discussions come as regulators across Europe continue to determine how prediction markets fit within existing gambling and financial frameworks, with Polymarket seeking a regulatory route into jurisdictions where its services are currently restricted.