EL Urges Regulatory Coherence as Prediction Markets Gain Ground Across Europe

Prediction Markets at the Crossroads of Finance and Gambling

Prediction markets allow users to take positions on the outcomes of future events, including elections, economic indicators and sporting competitions, through products commonly known as event contracts.

According to EL, their regulatory treatment should be determined by the legal characteristics, economic substance and risks associated with each product rather than by its marketing terminology or the technology used to offer it.

Different Regulatory Frameworks Across Europe

Under the current European framework, event contracts that qualify as financial instruments under the Markets in Financial Instruments Directive (MiFID II) are subject to financial services regulation. When they do not qualify as financial instruments, their treatment depends on the applicable national gambling framework.

EL also emphasises that classification as a financial instrument does not automatically exempt a product from national gambling legislation. Since gambling regulation remains a national competence, prediction market services must be assessed on a jurisdiction-by-jurisdiction basis.

Technology Should Not Change the Regulatory Approach

EL argues that technologies such as distributed ledger technology, blockchain, smart contracts and tokenisation should not alter the fundamental regulatory assessment. The organisation supports a technology-neutral approach in which activities presenting equivalent characteristics and risks are subject to equivalent rules.

“Prediction markets are developing rapidly, and regulation should keep pace,” said Piet Van Baeveghem, EL Secretary General. He added that the focus should remain on the nature of the product and activity rather than the label or technology involved.

Coordination Between Authorities

EL welcomed a recent statement from the European Securities and Markets Authority (ESMA) recognising that event contracts may also constitute betting under national gambling law. The organisation said this highlights the importance of coordination between financial and gambling authorities.

Against this backdrop, EL supports keeping prediction markets within the existing European regulatory architecture, with policymakers focusing on consistent application and enforcement of current rules as the sector continues to develop.