EU Regulator Says Prediction Markets Are 'Rife With Inside Trading'
ESMA warned that prediction markets are vulnerable to insider trading, manipulation, and reactive enforcement. It cited cases including profitable trades before an Iran strike, linked accounts betting successfully on Iran, alleged Polymarket profits tied to the Maduro capture, and suspected tampering with weather sensors used for settlement. ESMA said platform controls often start only after gains are realized. The regulator also said EU growth is limited by fragmented rules: event contracts may be financial instruments, crypto assets, or gambling products, and some rules bar retail sale entirely. Kalshi and Polymarket block some EU countries but not all, while VPN restrictions may be ineffective. Malta is drafting a framework. Trading volumes have risen sharply since ESMA’s data cutoff, with sports driving much of Kalshi’s activity. ESMA also noted that gains are highly concentrated among a tiny share of accounts and that most users lose money. In the U.S., regulators are taking a more permissive, jurisdiction-focused approach.
