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The European Securities and Markets Authority has warned that prediction markets are “rife with insider trading,” adding that retail users face risks including financial loss, addictive behavior and exploitation.
The comments were highlighted in Esma’s latest risk report and focused on fast-growing platforms such as Kalshi and Polymarket. According to the report, those markets require “continued monitoring” because of investor-protection and market-integrity concerns.
Esma links prediction markets to investor-protection concerns
Esma said prediction platforms can resemble speculative gambling environments when they are accessed through platforms not authorized in the EU. In a statement cited by _The Independent_, the watchdog said retail users may not get the protections usually associated with regulated financial products.
It also warned that the “gamified structure, emotional dynamics and social media-driven promotion” of these markets can expose inexperienced users to significant harm.
Prediction markets let users trade contracts tied to future outcomes, including sports, elections and economic indicators such as gas prices.
Europe is still weighing how to regulate the sector
The report said prediction markets are currently prohibited across much of Europe under existing regulations. At the same time, some jurisdictions are exploring possible frameworks rather than taking a single continent-wide approach.
According to the article, Malta is researching a regulatory framework for prediction markets, while the UK’s Financial Conduct Authority has said it is considering whether to change rules covering retail investor access.
The story also said Polymarket is “growing its presence and expanding into Europe,” while Kalshi co-founder Luana Lopes Lara said she was “very excited” about the possibility of expanding into the region.
What players should watch
For users following prediction markets, the immediate takeaway is that European regulators are treating the category as a consumer-protection and market-integrity issue, not just a new trading product. The biggest open questions are whether any EU jurisdictions create formal frameworks, what limits the UK may consider, and how that could affect access for major platforms seeking to expand abroad.
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Source: As reported by the-independent.com.
