Polymarket wants to be regulated as financial services business

Prediction markets platform Polymarket is lobbying European regulators to classify its contracts as financial products. The New York-based company seeks to expand internationally and raise capital valued at over $20 billion. Polymarket argues that treating its contracts as financial derivatives would allow the platform to operate under EU markets regulations rather than national gambling laws.

The platform offers contracts tied to future events, including elections, sports, and weather. EU regulatory bodies such as the European Securities and Markets Authority and European Commission have been approached by Polymarket for discussions on potential licensing arrangements. This regulatory classification is crucial for Polymarket's ability to offer the platform to retail investors across Europe.

While the US has precedent for prediction markets as financial derivatives, US states have sought to apply gambling laws to these operators. The UK's regulatory framework presents challenges for Polymarket, as some prediction contracts fall under the FCA's remit while others are treated as gambling activities. The company has been actively engaging with regulators in London, Brussels, and several EU member states since June, including meetings with ESMA chair Verena Ross and the FCA's chief executive Nikhil Rathi.

Polymarket has also joined Blockchain for Europe and is in talks with other European industry groups to gain support for its preferred regulatory treatment.