News Summary

• Prediction markets are becoming one of the fastest growing areas in the digital economy.
• However, regulators are concerned that it may create new risks.
• The latest ESMA warning prediction markets discussion focuses on event contracts, retail protection and whether platforms such as Polymarket and Kalshi would end up being subject to financial regulations in Europe.
• As the popularity of prediction trading grows the debate on prediction markets regulation will decide whether they become a new financial market or are subjected to further limits.
• ESMA examines a number of factors when determining whether a contract falls under the definition of financial instruments.