Polymarket is lobbying regulators in Europe and the UK to be regulated as a financial services firm rather than a gambling company, as it seeks to expand internationally.
The New York-based company has been meeting regulators in London, Brussels, and across the EU to argue that its contracts should fall under financial services rules rather than country-specific gambling laws, according to people familiar with the matter, as reported by The Financial Times.
Polymarket has gained popularity in the US by allowing users to trade contracts linked to future events, including sports, elections, central bank decisions, Oscar winners and weather events. However, prediction markets are prohibited for retail investors across much of Europe, restricting Polymarket’s expansion in the region.
The company is engaging with the European Securities and Markets Authority (ESMA) and the European Commission, one person said. It has also met regulators in some EU member states as it seeks to obtain licences in Europe, another person said.
Polymarket, which has been raising funds at a valuation of more than $20 billion, is reportedly seeking to have its contracts regulated under the Markets in Financial Instruments Directive (MiFID), which governs financial services firms, rather than gambling laws.
The company argues that its contracts should be treated similarly to derivatives instead of bets.
In the US, prediction markets are overseen by the Commodity Futures Trading Commission (CFTC) as financial derivatives. The regulator is currently facing challenges from some US states seeking to apply gambling laws to these platforms.
Reports indicate that ESMA Chair Verena Ross met two US-based members of Polymarket’s legal team, alongside a Paris-based lawyer from A&O Shearman and a Brussels-based lobbyist from Hanbury Strategy in June. A day later, Polymarket executives met FCA chief executive Nikhil Rathi.
“As we grow our presence and expand globally, we are committed to engaging early and openly with policymakers and regulators,” Polymarket said.
The company also joined Blockchain For Europe this month as part of its efforts to build relationships with European industry groups. It has begun discussions with other trade organisations in the region, according to another person familiar with the matter.
The UK Financial Conduct Authority (FCA) has said it is considering whether to reform its rules on retail investor access to prediction markets. However, it has described its ban on binary options for retail customers as appropriate because of the contracts’ speculative and gambling-like nature and the potential risk of consumer harm.
The FCA has said prediction markets covering financial or certain climatic events fall under its remit, while markets on political outcomes and sports would fall under the Gambling Commission. Sports and political markets account for much of the revenue generated by Polymarket and rival Kalshi.
Gambling authorities in the UK, as well as France, Germany and Italy, have said prediction market operators would need to obtain gambling licences in their respective jurisdictions.
ESMA has also warned against loosening EU rules on prediction markets, saying this month that they were “rife with insider trading”.