Prediction markets remain an uncomfortable proposition for Europe, rejected by many observers. Yet, legal expert Claire Pinson-Bessonnet, states that there is a pathway for prediction markets to gain acceptance… Just don’t shoot the messenger!
Perhaps it’s a culture clash or maybe something has been lost in translation, but the rise of prediction markets does not sit well with the sentiments and emotions of European gambling.
Discussed at industry conferences, forums or on social media, the matter draws irritated reactions from most European executives, be it “C’est dégoûtant, mag das nicht, algo feo or molto strano.”
Any debate on predictions markets having a future in Europe is struck down immediately, the matter too contentious and brazen as if the US sector has pitched the equivalent of pineapple on pizza or cheese in a can for gambling.
It’s simply too much for Europeans to stomach, as these young valley-type Svengalis flaunt rules and play dressage of online betting exchanges to be nip-tucked as new financial commodities. One-by-one, European regulators have stepped-in to recall that those markets are regulated.
Sensitivities at boiling point must be tempered, argues Paris-bar lawyer and regulatory affairs expert for European gambling, Claire Pinson-Bessonnet of CPB Avocats, who tells SBC that prediction markets might have a path to a European reckoning.
Too many European executives see regulatory arbitrage or a lack of product distinction from sports betting. Pinson-Bessonnet sees a sector expanding faster than the tools designed to contain it.
The extensive work carried out by gambling and financial regulators to determine the exact nature of predictive markets, which straddle the line between gambling and financial innovation, is a clear indication of this.
Prediction markets, Pinson-Bessonnet argues, sit in a “legal in-between “neither completely authorised under the EU financial regulation nor fully absorbed by any of Europe’s state-designed gambling regimes.”
As such, she recommends to resist the simplistic framing of prediction markets as either “just gambling or just finance because according to European regulations they could be a little bit of both”.
The swift enforcement responses of some regulators correspond to their missions: in Europe, anything not explicitly authorised remains prohibited and what is authorized according to gambling and finance regulation requires a license.
“When it comes to regulation, the principle is: anything that is not explicitly permitted remains prohibited. Gambling and financial regulation, which impact the development of prediction markets and are elaborated at different levels (member states and the EU), cover only part of the prediction market offering.”
In terms of financial instruments, only certain underlying assets (e.g. indices, currency pairs, stocks, commodities) are permitted under certain conditions under EU derivatives regulations.
In terms of gambling, some prediction markets (sports, political events) are subject to oversight by gambling regulators when national regulations allow them. Beyond that, prediction markets will be considered unauthorized offerings.”
Pinson-Bessonnet cautions that Europe’s response to prediction markets should not be reduced to a binary clash between gambling law and financial regulation. In her view, regulatory classification is only one determination.
“Prediction markets are not rejected because they have been clearly defined, but because part of them fall outside what is currently authorised,” she explains, noting that gambling and financial rules “only partially cover the activity, and anything beyond that is treated as prohibited.”
Impasse leaves doors open
While enforcement actions by several jurisdictions give the impression that the door has been firmly shut, Pinson-Bessonnet argues the situation is better understood as unresolved rather than ultimately settled.
Prediction markets are not being excluded because regulators have definitively decided what they are. The impasse is due to not falling entirely within current legal parameters “Beyond those limited cases where a license is required,” she notes, “prediction markets will be considered unauthorised offerings.”
An unresolved determination leaves open, in theory, the possibility of a European pathway for prediction markets. In the US, prediction-market operators successfully argued for the creation of a new ad-hoc category of financial instruments, as ‘event derivatives’ would be authorised under federal commodities regulation.
Europe, however, operates within a narrower perimeter. “Only certain underlying assets such as indices, currency pairs, stocks or commodities — are permitted under EU derivatives regulation, and only under specific conditions,” she points out, adding that retail-facing speculative instruments have long been treated with caution.
Via lobbying and undertaking specific product alignments, those backing prediction markets could engage incrementally with gambling and financial frameworks, which continue to be modified by the EU and member states.
Of significance the dawn of prediction markets comes as the EU redesigns the regulatory oversights of its financial markets:
“Some could assess that the context in Europe would call for a regulatory public affairs strategy similar to that implemented in the United States, which would solely target a change in financial regulation because financial regulation is decided at the EU level, with the powers of the European Securities and Markets Authority (ESMA) set to increase and those of the National Supervision Authorities to decrease, while ESMA recommends giving priority to regulations that are directly applicable in Member States to avoid differences in interpretation.”
No to UBERisation
However, Pinson-Bessonnet is clear that any European pathway for prediction markets would require a distinctly European playbook and not a replay of the US experience.
While lobbying and regulatory engagement may form part of that strategy, she rejects the assumption that scale, popularity or consumer engagement alone would be sufficient to force acceptance.
In particular, she dismisses the idea that prediction markets could follow the disruptive, scale-first approach adopted by US platforms. “In the absence of strong political will from Europe to establish the prediction market sector,” she cautions, “the UBERisation method does not seem to be the most appropriate way to enter into a constructive dialogue with the authorities.”
For European regulators, she argues, rapid market penetration is not a signal of legitimacy but a trigger for enforcement.
This distinction is critical. Even if prediction markets were to attract significant consumer participation, or position themselves as a popular alternative to sports betting, Pinson-Bessonnet does not believe this would soften Europe’s regulatory stance.
On the contrary, she warns that the activity would remain subject to multiple layers of public-order regulation, from gambling law to financial supervision both focusing in particular on consumer protection.
“The activity of prediction markets is currently subject to several types of regulations pertaining to public order and consumer protection,” she notes, making any attempt to bypass those constraints politically counterproductive.
Instead, prediction markets should accept that Europe’s regulatory culture rewards institutionalisation rather than disruption, a very European condition witnessed by other US technology players.
The challenge is not simply legal classification, but whether prediction markets can convince European authorities that their presence serves a purpose compatible with Europe’s regulatory priorities. “Beyond the regulatory obstacles, the question is whether there is any political interest in regulating prediction markets in Europe,” Pinson-Bessonnet explains.
“As long as the applicable law has not changed, narrative alone cannot influence the regulators’ assessment,” she adds.
Europe… always safety first
Ultimately prediction markets path to Europe may be shaped less by gambling debates than by the EU’s wider approach to emerging financial technologies.
Brussels continues to assert itself as the primary architect of regulatory frameworks for fintech, cryptoassets and digital finance, In a likely scenario prediction markets could request to examine on their own merits, and to be distinguished from both traditional betting and speculative retail finance.
As Pinson-Bessonnet concludes, should Europe choose to engage with prediction markets the impacts would extend well beyond wagering. “The development of prediction markets in Europe could have numerous implications, including strengthening the need for financial education, boosting national betting markets, and accelerating the institutionalisation of the cryptoassets ecosystem.”
Such an outcome would not represent a regulatory concession, but a continuation of Europe’s safety first approach by defining, containing and institutionalising new activities only once their risks, purpose and boundaries are clearly understood.