Polymarket is trying to convince EU and UK regulators that its event contracts should be treated as financial instruments rather than gambling products.
That classification could provide a basis for regulated operations, but contracts treated as financial instruments may also face restrictions on retail distribution.
The company has held discussions with the European Securities and Markets Authority, the European Commission, the UK Financial Conduct Authority and national regulators as part of its European licensing efforts, the Financial Times reported, citing people familiar with the matter.
According to the report, Polymarket argues that its contracts operate like derivatives and should therefore be regulated under financial-market rules.
Financial Classification Brings Retail Restrictions
The regulatory paths differ between the EU and UK, but both separate the classification of individual contracts from the question of who may trade them.
EU Rules Depend on the Contract
ESMA said in July that event contracts tied to an underlying covered by MiFID II may qualify as financial instruments. Platforms offering those contracts require MiFID authorisation, even when serving only professional clients.
Contracts with a fixed payout or nothing based on a yes-or-no outcome also fall within national restrictions on binary options, which prohibit their sale to retail investors.
As Finance Magnates previously reported, calling them “event contracts” does not change that treatment. Crypto-assets outside MiFID may instead fall under MiCA, while products treated as bets remain subject to national gambling laws.
The EU therefore has no single authorisation covering Polymarket’s entire contract range.
UK Oversight Is Divided
The FCA’s perimeter report places contracts linked to financial or certain climatic events within its remit and identifies the products it has reviewed as binary options. They remain covered by the regulator’s current retail ban.
Contracts based on non-financial events, including sporting and political outcomes, fall under the Gambling Commission. Securing FCA permissions for financial contracts would therefore leave the rest of Polymarket’s offering subject to a separate regulatory regime.
Licence and Launch Market Remain Undisclosed
Polymarket joined Blockchain for Europe, a Brussels-based trade association, earlier this month. The company said it would participate in discussions covering digital-asset regulation, consumer protection and market integrity.
Polymarket has not publicly identified the jurisdiction in which it would seek authorisation, the permissions it plans to request or a timetable for launching regulated European services.
It has also not said whether an initial offering would be limited to professional clients or exclude contract categories that remain under gambling supervision.
This article was written by Tanya Chepkova at www.financemagnates.com.
Source: Finance Magnates
