EU Tightens Its Grip on Prediction Markets as France Blocks Polymarket and ESMA Draws the Derivatives Line

In the last few weeks, the European Union has moved from watching prediction markets to actively fencing them in. For high-risk PSPs, the important part is not the headline politics; it is that the same product can be treated as illegal gambling in one country and as a financial derivative in another, with separate regulators now saying so out loud.

1. On 16 July, France’s National Gaming Authority (ANJ) ordered internet service providers to block access to Polymarket. The regulator said the platform was offering illegal betting to a broad audience, pointing to 578,751 visits and 205,057 unique visitors in June alone.
2. The ANJ had been monitoring Adventure One QSS Inc, the operator of Polymarket, since November 2024. After a formal notice, the company geo-blocked transactions from France, but the regulator said the restriction was being bypassed in practice. Paris prosecutors also found that the platform lacked identity verification for European users, and the final trigger was suspicion of manipulation in some bets, including those linked to weather sensors.
3. France is not acting in isolation. Germany, Belgium, Romania, Switzerland, Poland, the Netherlands, Greece, Italy, Portugal, Spain, Ukraine and the Czech Republic also restrict these markets. For PSPs, that is the operational reality: if a product touches multiple European jurisdictions, the compliance answer is not one answer.
4. On 3 July, ESMA reminded firms that they must assess whether event contracts — binary-payoff products tied to a yes-or-no question — qualify as financial derivatives. According to lawyer Wulf Hambach, if a contract references interest rates, currencies, commodities or climate variables, it is a derivative and therefore falls under the ban on marketing binary options to retail clients, in force since 2018.
5. Ismail Vali, chairman of Gaming Compliance International, says this clarification cuts against the idea that prediction markets are a universal product for every topic. A contract on the price of bitcoin, he argues, works as a binary financial product, not as some neat little gaming innovation. In other words: the classification question is the business model.
6. Ten days later, on 13 July, Gibraltar published its own regulation under the Gambling Act 2025, billed as the world’s first specific framework for these markets. It requires certification of each contract and bans bets on crimes, death, terrorism or war. But experts say this licence does not override ESMA’s rules on financial derivatives, which leaves almost everything out except sports contracts.

The U.S. side runs on the opposite logic. There, operators classify event contracts as futures or swaps under the Commodity Exchange Act, using federal law to override state gambling laws. That financial label gives them a shield against state betting regulators and, as Vali notes, creates a competitor that can profit from both regulated and unregulated betting, collect fees, and operate across the divide.