Polymarket is reportedly leading a “lobbying blitz” in the UK and EU countries to secure its products’ status as financial services rather than gambling.
The prediction markets giant, one of the two biggest in the world alongside arch rival Kalshi, has been evicted from several European nations including Italy, the Netherlands and France, to name a few.
Regulators have largely labelled prediction markets as a form of gambling. Polymarket is seeking to change this outlook, according to the FT, hoping to convince European regulators to take the same approach as the US Commodity Futures Trading Commission (CFTC).
According to the FT, Polymarket has been meeting regulators in London, likely the Financial Conduct Authority (FCA), and in Brussels, reportedly with the European Commission and European Securities and Markets Authority (ESMA), as well as with other national regulators across the European Union (EU).
What are Polymarket’s prospects?
From the outset, Polymarket has a tough job on its hands. The reason for this is mentioned above – European gambling regulators have been pretty adamant that they see prediction markets as a form of gambling, and an illegal form of it at that.
To get its wish, Polymarket needs to bypass these gambling regulators and convince governments that its “event contract” products fall under financial regulators rather than gambling regulators.
A problem the company will face is that governments across Europe are also heavily invested in reducing gambling harm. Politicians might not be too keen on allowing another industry widely seen as a form of gambling, or at least gambling-adjacent, to flourish at this time.
In the Netherlands and Belgium, gambling advertising bans are coming into effect, while in the UK the government is hiking taxes on the industry and looking at ways to reduce the sector’s presence on the British high street.
However, European economies are desperate for growth and innovation. In the UK, where the government is preparing its next budget, government borrowing hit £18.3bn in August, while the EU has a spending plan of over €2trn (€1.17trn) lined up for its next budget.
In the US, prediction market trading has hit around $24bn a month according to Forbes. This is all taxable revenue, which could prove fruitful for British, EU, and EU member state governments if companies find a regulatory pathway on this side of the Atlantic.
ESMA, the EU’s securities regulator, has been meeting with Polymarket since June according to the FT. The regulator seems to have mixed views, stating in July that “event contracts exist for a wide variety of event questions”, some of which can be classed as financial instruments or derivatives, but some cannot.
All in all, it cannot be overstated how much scepticism there is towards prediction markets in Europe. ESMA itself has previously stated that there are a “range of investor protection and market integrity concerns” around prediction markets, such as instances of insider trading.
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