Is Polymarket Allowed in Germany? What the ESMA Report Says About Prediction Markets

The short answer to the question German readers have been asking for months has been sitting in a European supervisory document since September 10, 2026: the marketing and sale of event contracts in the EU generally requires an EU authorisation, and the largest prediction market platforms do not currently hold one. That is how the European Securities and Markets Authority puts it in its TRV Risk Monitor No. 2/2026, which devotes a chapter of its own to prediction markets for the first time.

For the German debate that is a step change. Until now, Polymarket and Kalshi had attracted legal opinions from law firms, assessments from newsrooms and a great many forum posts. Now there is a statement from the authority that supervises securities markets across the EU, and the chapter can be cited. What the report expressly does not settle matters just as much: it says nothing about whether an individual German user faces consequences, and nothing about what happens to funds already sitting on such a platform. That gap stays a gap in this article too.

What ESMA Writes About EU Authorisation for Polymarket and Kalshi

A prediction market is a platform on which participants trade contracts whose payout depends on the outcome of a future event. Throughout the report ESMA calls these event contracts. Two sentences from the chapter carry the whole assessment. The first reads: “the marketing and sale of event contracts in the EU generally requires an EU authorisation, which the largest prediction market platforms currently do not hold.”

The second draws the consequence for the case in which an event contract counts as a financial instrument: “where event contracts qualify as financial instruments, they would generally be classified as derivatives and fall within the scope of national product intervention measures relating to binary options, under which their marketing, distribution and sale to retail investors are prohibited.”

In the same chapter ESMA names the providers: Polymarket and Kalshi as the large ones, alongside PredictIt, Robinhood, Pariflow, DraftKings and FanDuel. All of them are based outside the EU. The two operating models differ markedly. Polymarket, as the report describes it, is partly decentralised: trading and settlement run on-chain, while market governance and administration stay central. Kalshi is organised entirely centrally and is regulated by the US supervisor CFTC as a designated contract market, an officially named trading venue under US law. In the United States a dedicated CFTC advisory committee now meets on this sector; the EU side, by contrast, was undocumented until this report.

Why Prediction Markets Are a Crypto Question: On-Chain Settlement, Oracles and DeFi

The authorisation question would be a pure exchange story if the contracts did not sit on a blockchain. Polymarket's do exactly that. Positions are represented as shares, settlement is handled by a smart contract, a program on the blockchain that executes an agreed payment automatically. The outcome of an event reaches the chain through an oracle, a service that makes external data available to a blockchain program. For anyone following the crypto market, a prediction market is therefore not a betting shop but a DeFi application whose risks resemble those of other on-chain applications.

ESMA draws the same line. The report records that transactions via smart contracts are irreversible, including in the event of a dispute, a programming error or an operational failure, and that dependence on external data feeds and oracles creates an attack surface where those mechanisms are manipulated or unreliable. Decentralised prediction markets, in the authority's account, operate without identifiable intermediaries and without central governance, which limits accountability and supervision.

The sector hangs on the crypto market in substance too. According to the platform data evaluated in the report, 15 percent of Polymarket's trading volume falls on crypto-related markets, such as contracts tied to the price of Bitcoin. Politics leads there with 29 percent, sport follows with 19 percent. At Kalshi the picture looks different: 73 percent of the trading recorded falls on sports markets. Anyone looking for regulated routes into the crypto market will find the vetted providers in our overview of the best regulated crypto exchanges, rather than on a platform without EU authorisation.

What an Event Contract Is, and Why the Classification Decides Everything

An event contract is a contract with a binary payout: if the event described in the contract occurs, there is a fixed amount; if it does not, there is nothing. The price of a share can be read as the probability the market currently assigns to the outcome. ESMA describes that as an analytical benefit: prediction market prices could deliver economically interpretable signals about political, economic and social events, and thereby support forecasting, sentiment analysis and assessments of macroeconomic uncertainty. Commercially the benefit is already tangible: according to the report, prediction market data is increasingly distributed through Bloomberg and LSEG Workspace.

For the legal question, however, what counts is the construction of the individual contract rather than its usefulness. In a footnote the authority becomes very precise: not every event contract is a financial instrument under MiFID II. Only contracts whose event question refers to an underlying from Section C points 4 to 10 of Annex I of MiFID II qualify as financial instruments. The classification therefore hangs on the specific question being wagered on, and not on the name of the platform. A contract on a share index may have to be treated differently from one on an election result.

Three Possible Legal Regimes: MiFID II, MiCA or National Gambling Law

Depending on how they are built, the report assigns event contracts to one of three sets of rules. MiFID II is the European directive on markets in financial instruments; it applies where the contract is a financial instrument under the footnote just mentioned. MiCA is the EU regulation on markets in crypto-assets; it can apply where the contract rests on distributed ledger technology and is precisely not a financial instrument. That leaves the third case: the contract is then treated under national law as a gambling product, and in Germany the gambling authorities of the federal states have jurisdiction, not the securities supervisor.

This three-way split explains why the question stayed unanswered so stubbornly. Depending on what a user wagers on, the same provider lands in a different legal regime, with different competences and different consequences. ESMA also records in its chapter that the Market Abuse Regulation against manipulation and insider dealing can only help where the contracts fall within the financial supervisory perimeter at all. Where they do not, that instrument has no purchase.

The BaFin Binary Options Ban and What It Has to Do With Event Contracts

The strand of the chapter that matters most to German readers is the reference to product intervention. A binary option is a financial product with exactly two possible outcomes, a fixed payout or a total loss. ESMA restricted its marketing to retail investors across the EU on a temporary basis in 2018; that temporary measure was subsequently replaced by permanent national measures taken by the respective supervisory authorities. In Germany that is the BaFin general administrative act under Article 42 MiFIR, in force since July 2, 2019, which prohibits the marketing, distribution and sale of binary options to retail investors with no end date.

The bridge sits as a footnote in the risk report: ESMA refers to its own public statement on applying exactly these national product intervention measures to event contracts, published in July 2026. That completes the chain of reasoning. Where an event contract is a financial instrument, it is as a rule a derivative; where it is a derivative with a binary payout, product intervention applies; and where product intervention applies, distribution to retail investors is prohibited. The supervisor did not have to create a new rule for this. It applied an existing one to a new market.

Is Polymarket Allowed in Germany? What the Report Says and What It Leaves Open

Cleanly separated, the position looks like this. The provider side is answered: on ESMA's finding, offering event contracts in the EU requires an authorisation, and the large platforms do not hold one as far as the authority is aware. The distribution side is answered for part of the products as well: where the contracts are financial instruments, distribution to retail investors is blocked by product intervention.

The user side is not answered. The report makes no statement about whether a user in Germany exposes themselves by taking part. It makes no statement either about what happens to funds already sitting on an unauthorised platform. Both are legal questions touching on German gambling and criminal law, and a securities markets authority has no business deciding them. Anyone wanting that settled for their own case needs a lawyer, not a guide article. What this article can do is make the dividing line visible: on the authorisation of the providers there is now a statement from a supervisor, on the personal position of the user there is not.

For assessing a provider there is also a practical tool that ESMA operates itself: the warning list of the European supervisory authorities. It lets you check whether an authority has issued a warning about a company before money is transferred.

Geoblocking and VPNs: What ESMA Criticises About the Access Restrictions

A separate paragraph of the chapter deals with the platforms' country lists. It reads: “Both Polymarket and Kalshi state on their websites that users located in some, but not all, EU countries are prohibited from placing orders. It is unclear why all EU Member States are not included in the list of restricted jurisdictions.” ESMA expressly connects that with the risk of unauthorised provision of services under MiFID II, MiCA and national gambling law.

To that comes a second finding, reproduced here purely as a finding of the supervisor: geographical restrictions, in ESMA's assessment, do not prevent users from the EU accessing the services over VPN connections. The authority adds that the platforms can prohibit VPN use and suspend accounts, but regards the practical effectiveness of these restrictions as uncertain. That is not a set of instructions and is not meant to become one here; it is the observation that a barrier providers invoke serves its purpose only to a limited extent in the supervisor's view.

Figures From the Risk Report: Trading Volume, Categories and the EU Gap

Trading has grown, visibly so since the 2024 US presidential election, which the report names as the trigger. In the fourth quarter of 2025, quarterly volume according to the platform data evaluated by ESMA stood at around 8.8 billion US dollars on Kalshi and around 12 billion US dollars on Polymarket, with further growth into 2026. At the same time the traditional exchange camp is moving closer: Eurex, Euronext, CME Group, CBOE, ICE and Nasdaq are showing interest in the sector, as the report describes it. ICE has committed to investing up to 2 billion US dollars in Polymarket and has become the exclusive global distributor of the event data.

Alongside that stands a sentence about the EU that puts the opening question in perspective: “prediction markets do not appear to have gained significant traction in the EU compared with the US.” ESMA attributes that to the European regulatory approach, which severely restricts marketing and sale. The methodological caveat the authority makes itself matters here: “available data mainly reflect global market activity and do not permit an assessment of EU retail participation.” How many German users are actually active therefore appears in no source at all.

Insider Trading and Manipulation: the Regulator's Market Integrity Findings

In one place the chapter becomes unusually blunt. ESMA writes that a growing number of incidents shows prediction markets to be riddled with insider trading, and supports that with three examples from the current year. Around the US-Israeli strike on Iran in February 2026, newly created wallets are said to have made roughly 1.2 million US dollars in profit shortly before the operation became public. In connection with the detention of Nicolás Maduro, a US soldier was charged according to a US Department of Justice statement of April 23, 2026, on the accusation of having bet on a prediction market using information classified as secret. And in April 2026 a suspicion that weather sensors used to resolve weather contracts had been manipulated led to a criminal complaint by Météo-France. These cases are suspicions, not verdicts.

Structurally the authority traces the vulnerability back to pseudonymity. On DLT-based platforms with limited identity checks, the operator may not know who stands behind a position, and participants can run several accounts. According to the report that makes it harder to detect insider dealing, wash trading and coordinated manipulation. ESMA describes platform surveillance as largely reactive: investigations often begin only once the event has occurred and the profit has been realised. How quickly technical risks become real on such a platform is something we described in our piece on the Polymarket hack and the security risks of prediction markets.

Who Earns on Prediction Markets: 67 Percent of Profits, 0.1 Percent of Accounts

On the question of who actually makes money on these markets, ESMA cites two external analyses. A Wall Street Journal analysis from May 2026 concludes that 67 percent of the profits on Polymarket accrue to 0.1 percent of accounts. A Bloomberg analysis from May 2026 reports that most Polymarket users lose money. The authority puts that in context: profits are heavily concentrated among experienced participants trading in a data-driven, algorithmic and increasingly AI-supported way.

From this the report identifies a protection problem for retail investors. Prediction platforms, it says, offer speculative environments without the investor protection measures usually attached to regulated financial products, where access runs through providers not authorised in the EU. The gamified structure, the emotional dynamic and the promotion via social media expose inexperienced participants to considerable risks, from losses through addictive behaviour to exploitation by professional market participants with an informational or technical edge. On top of that comes a risk that has nothing to do with forecasting: unclear event definitions, opaque resolution mechanisms and delays in payout and settlement.

Malta, the MiCA Review and the Roadmap: What Comes Next

There is movement on two levels. Malta, as the report describes it, is the first EU member state publicly examining a regulatory framework of its own for prediction markets; the Maltese government described the sector in March 2026 as a field with considerable innovation potential, provided a suitable legal framework emerges. In parallel, the European Commission's targeted consultation on the review of MiCA is running at EU level, its deadline extended to September 30, 2026. There, for the first time, it is formally up for discussion whether and under which set of rules DLT-based prediction markets should be run in the EU.

For you that means two things. The current statement is solid, but it is a snapshot of a legal framework currently under review. And the direction of that review is open: a future classification under MiCA would open an authorisation route in the EU for prediction market operators, while classification as a binary derivative continues to bar distribution to retail investors. Anyone watching the market should keep an eye on the end-of-September deadline and the Commission's evaluation that follows.

Prediction Markets in Germany: What to Take Away

1. Separate the provider question from the user question. On the authorisation of the platforms, the ESMA risk report provides a statement from a supervisor. On the personal position of a German user there is none, and this article replaces no legal advice. Before the question of where you want to acquire crypto-assets at all, a look at our overview of the best crypto exchanges helps.
2. Check the supervisory status before money moves. A provider's authorisation can be looked up, and the warning lists of the European supervisory authorities are public. Anyone wanting to play safe stays with providers holding EU permission; which those are is set out in our comparison of regulated crypto exchanges.
3. Read the distribution figures before you read the return promises, and keep the MiCA review in view. The analysis cited in the report describes a market in which the overwhelming share of profits ends up with a tiny share of accounts; that is a statement about the structure of the market, not about any single bet. The Commission's consultation deadline ends on September 30, 2026, and what follows may change the very answer that holds today. Tools for recalculating market data yourself are listed in our comparison of the best crypto tools and analytics platforms.

(As of September 11, 2026. This article is not investment advice. Prices and fee structures change; check the terms with the provider before you buy.)