Prediction Markets Surge as EU Regulators Seek Control

The rise of prediction markets has transformed speculative practices into a multibillion-dollar industry, but regulatory concerns in the European Union (EU) are mounting. In 2025, platforms like Polymarket and Kalshi reported a staggering combined volume of over $37 billion (€31.5 billion) in wagers, marking a significant shift in how collective judgment is monetized.

Prediction markets function similarly to financial exchanges, allowing users to buy and sell binary contracts on future events, such as election outcomes or corporate earnings. These contracts typically pay out $1 if the predicted event occurs and $0 if it does not. For instance, if a contract is priced at $0.50, it reflects a 50% probability of that event happening. As these markets gain traction, they have begun to rival traditional polling methods, as evidenced during the 2024 US presidential election and the 2025 German snap election, where prediction markets provided real-time forecasts that often surpassed the accuracy of established polls.

The momentum behind prediction markets is undeniable. Recently, Kalshi secured $1 billion (€850 million) in Series E funding, valuing the platform at $11 billion (€9.4 billion). Similarly, Polymarket attracted a strategic investment of up to $2 billion (€1.7 billion) from the Intercontinental Exchange (ICE), pushing its valuation to $8 billion (€6.8 billion). This substantial interest from financial institutions has led industry leaders like Terrence Duffy, CEO of CME Group, to describe prediction markets as a “legitimate domain of speculation” that clients are increasingly demanding.

Despite their growth, many EU nations have imposed bans on prediction markets, fearing potential risks associated with gambling and market manipulation. The French National Gaming Authority blocked Polymarket in late 2024, deeming its operations as unlicensed gambling. Following this, Belgium, Poland, and Italy issued similar bans. In Romania, the National Gambling Office blacklisted Polymarket after it facilitated wagers on the 2025 presidential election, which exceeded $600 million in trade volume.

The integrity of prediction markets has come into question, especially following incidents such as a controversy involving a trader known as “AlphaRaccoon,” who reportedly netted over $1 million (€850,000) in 24 hours by betting on Google’s 2025 Year in Search rankings. Allegations surfaced that this trader might have access to proprietary data, raising concerns about insider trading and the anonymity of users in these markets.

In a recent demonstration of potential manipulation, Brian Armstrong, CEO of Coinbase, turned a quarterly earnings call into a showcase of how predictions can be influenced. As he paused to mention specific terms, the implied probability of those terms skyrocketed from around 15% to 100%. While Armstrong described the incident as spontaneous, it highlighted the vulnerabilities of prediction markets to manipulation, which could undermine their role as neutral forecasting tools.

As the EU grapples with these challenges, the regulatory landscape remains fragmented. While some nations like Germany and Spain permit prediction markets, many others have adopted strict controls. The upcoming implementation of the EU’s Markets in Crypto-Assets (MiCA) regulation, which will require platforms to secure a Crypto-Asset Service Provider licence by July 2026, adds another layer of complexity. MiCA aims to impose stringent market abuse regimes on any prediction market utilizing crypto assets.

As we approach 2026, the future of prediction markets in Europe hangs in the balance. With every world event being priced in real-time, the EU must decide whether to embrace this evolving landscape or enforce outright bans, navigating the fine line between innovation and regulation.