If you were watching the World Cup this summer, you may have noticed something among the sponsor logos: prediction market platforms, front and centre, marketing directly to a mainstream retail audience that had probably never heard of an “event contract” before kick-off. Whilst prediction markets are a relatively well-known concept in the US, those sponsorship deals say a lot about the industry’s intent to capture a wider audience – including in the EU – going from niche curiosity to mass-market.
If you’ve not come across prediction markets yet, they allow trading on the probability of a future event through so-called “event contracts”. Buy a contract on a particular election result, a court decision, or a sports outcome, and the price you pay reflects the market’s collective view of how likely that outcome is. Get it right, and the contract pays out a fixed amount. Get it wrong, and you get nothing. They are a binary structure, a yes/no answer – and that simplicity is why they have proven so popular, and exactly why they have proven so difficult for regulators to pin down.
We have been advising clients on this space for some time now, and two themes that come up in almost every conversation: how fast can these businesses scale across EU jurisdictions? And which regulatory box, if any, do these products belong in? The first cannot be answered without clarity on the second. That mismatch is where the legal and regulatory risk exists, and it is becoming more acute.
What is the EU / ESMA’s position on prediction markets and event contracts?
The most recent EU development came from ESMA, which published a statement on 3 July 2026. It confirmed that event contracts with binary, all-or-nothing payouts constitute financial instruments under MiFID, provided the underlying event is one of the types listed in Section C(4) to (10) of Annex of MiFID – for example, financial indices, currencies, or interest rates. Where that is the case, the product will be a “binary option”. Following an initial EU-wide temporary ban by ESMA (which expired on 1 July 2019) many EU jurisdictions (including Ireland) continue to ban the marketing, distribution and sale of binary options to retail investors under national product intervention measures. Where such products are not distributed to retail investors, they are not banned in most EU jurisdictions (including Ireland), but will trigger a MiFID authorisation requirement unless an exemption under MiFID is available.
ESMA also stated that the developing market practice of bolting a “reward” or “coupon” feature (representing the interest earned on the sums paid) onto a binary option – the idea of which is to render the characteristics of the product less like a “binary option” – does not, in itself, change the binary nature of the product.
Whilst ESMA’s statement helpfully provides some clarity where the underlying event is one of the types listed in Section C(4) to (10) of Annex I of MiFID, the larger and more interesting question is what about everything else – such as political elections, sporting results, entertainment outcomes?
Which regulatory regimes may apply to prediction markets in the EU?
So what regulatory treatment applies to these other types of event contracts? There are three key candidates, but which ultimately applies will depend on the structure and context of the products involved.
| MiCAR |
To the extent an event contract is not a MiFID instrument, where an event contract is issued or settled on distributed ledger technology, it may fall within MiCAR’s definition of a crypto-asset – triggering authorisation as a crypto-asset service provider unless an exemption is available. The ESMA statement acknowledges that some event contracts could be MiCAR crypto-assets.
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| Gambling laws |
Strip away the branding, and these products can look like a bet: stake money on an uncertain outcome, get paid if you are right, lose your stake if you are wrong. The ESMA statement acknowledges that some event contracts could be gambling bets. This would trigger a gambling authorisation under applicable national laws unless an exemption is available. Indeed, it was reported earlier this year that the new Gambling Regulatory Authority of Ireland (GRAI), established under the new Gambling Regulation Act 2024, was of the view that prediction markets bear “the hallmarks of betting activity“. More on that below.
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| MiFID |
Despite the ESMA statement, what falls within scope of being a MiFID financial instrument is not definitive. It has long been a source of frustration, at least for those seeking regulatory clarity, whether the list of underlying events in Section C(4) to (10) of Annex I of MiFID is intended to be exhaustive or illustrative. If exhaustive, it is an easier task to determine what types of event contracts fall within or outside of MiFID – though even then there is still room for interpretation, such as the precise meaning in C(10) of “climatic variable” or “other official economic statistics”. If illustrative, a broader interpretation should be applied, for example should C(4) be interpreted to include any financial-related underlying event and not just those specifically mentioned?
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Ireland’s approach to prediction markets – and how does it compare to other EU member states?
Recent Irish developments indicate that Ireland is leaning towards dealing with the majority of these products under gambling laws. As mentioned above, Ireland’s new GRAI was reported earlier this year as saying that prediction markets bear “the hallmarks of betting activity“. Backed by concerns raised by, Tánaiste, Simon Harris, around betting behaviours on prediction markets, in July the GRAI confirmed that its enforcement team has been active in this space over the last year, leading to a number of prediction market website operators voluntarily geoblocking Ireland. The GRAI also confirmed that where prediction market operators have not taken such action themselves, it has issued warning letters to those operators threatening court action to obtain a blocking order. For further details on the GRAI’s establishment and powers see here.
Notably, Kalshi and Polymarket, two of the largest prediction markets, have added Ireland to their restricted list, restricting access for Irish investors to enter their platforms.
Ireland’s approach aligns with that seen in some other EU member states, such as France, whose National Gambling Authority has instructed internet service providers to geoblock one of the largest prediction markets outright.
Gibraltar, by contrast, has reportedly taken a different approach: rather than trying to fit prediction markets into an existing regulatory box, it has built a dedicated and distinct regulatory regime, which exempts prediction markets from being considered to be gambling operators, and instead creates a new activity within the gambling legislation to accommodate prediction markets and their associated authorisation as such.
Whether Gibraltar’s ambition to position itself as open to the development of new markets pays off, and whether Ireland will ultimately follow suit, only time will tell – although given the political concerns referenced above and the position of the GRAI it is not likely that Ireland will follow suit in the short term.
How should prediction market operators and distributors proceed?
For anyone building or distributing these products, there is no single regulatory checklist to work through – the right approach depends on (i) the underlying event; (ii) the structure of the product; and (iii) its context. What is key is not to wait for the regulatory picture to fully resolve before you engage. The direction of travel is towards more scrutiny, not less, and those that are thinking these issues now – rather than later – will be in a materially stronger position.
Contact us
This is a fast-evolving area and we will continue to share insights as developments occur. If you would like to discuss this topic further, please get in touch with Sara Ross, Joe Beashel, Ian O’Mara or your usual Matheson contact.
