ESMA: Prediction Markets 'Rife With Inside Trading'
EU regulator targets Kalshi and Polymarket over insider abuse and inconsistent geo-blocks.
The European Securities and Markets Authority (ESMA) declared prediction markets including Kalshi and Polymarket "rife with inside trading" in a report published as of September 2026, calling for urgent regulatory scrutiny of the sector.
Why It Matters
ESMA's findings put two of the largest prediction market platforms directly in regulators' crosshairs at a moment when both are expanding aggressively. The inside-trading allegation is serious: if proven, it means informed participants systematically extract value from retail users who trade on public information alone. ESMA also flagged an inconsistency that undermines the platforms' compliance credibility — Kalshi and Polymarket block access from some EU member states but not others, with no clear legal rationale. Critically, ESMA noted that VPNs trivially circumvent even those partial blocks, exposing the geo-restriction strategy as largely theatrical. For users in affected jurisdictions, this signals that the regulatory window for unrestricted access may be closing fast.
Context
Prediction markets occupy a legal grey zone in the EU, sitting awkwardly between financial derivatives (regulated under MiFID II) and gambling products (regulated at member-state level). As of September 2026, neither Kalshi nor Polymarket holds an EU financial services licence, according to Decrypt. ESMA's intervention follows a broader global surge in prediction market volume driven by high-profile political event contracts.
What's Next
ESMA is expected to issue formal guidance clarifying whether prediction market contracts qualify as financial instruments under MiFID II — a classification that would trigger full broker-dealer compliance requirements. Platforms that fail to respond with consistent, enforceable geo-blocking or licensing applications risk enforcement action from national competent authorities.
Gambling and speculative trading involve financial risk. Never stake more than you can afford to lose.
Source: Decrypt
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