ESMA warns Polymarket and Kalshi lack EU authorization

The European Securities and Markets Authority (ESMA) has raised concerns regarding prediction market platforms Polymarket and Kalshi, noting they lack the necessary authorizations to serve users within the European Union. According to ESMA, the legal status of prediction contracts varies; some are classified as financial instruments under MiFID II, others as crypto-assets under MiCA, and some may fall under national gambling laws.

ESMA highlighted risks regarding market integrity, noting that limited identity verification on blockchain-based platforms like Polymarket can make it difficult to detect insider trading, wash trading, and coordinated manipulation. The regulator also questioned the effectiveness of current restrictions, as users can often bypass regional blocks using VPNs.

Additionally, the authority warned that a sell-off in technology stocks could exert pressure on crypto assets. The report also noted that large tech companies are heavily indebted to finance artificial intelligence expenditures.