Gibraltar hosts first European summit on prediction markets
Billed as Europe’s first prediction-markets summit, on Monday and Tuesday delegates gathered in Gibraltar’s Ocean Village. The location was no coincidence. While most of the Europe’s regulators are busy blocking prediction markets, Gibraltar is so far the only jurisdiction that licenses them.
“Gibraltar has already moved from the theoretical to the practical application of a regulatory regime,” Andrew Lyman, the territory’s gambling commissioner and one of the summit’s speakers, told iGB.
Nigel Feetham, Gibraltar’s justice, trade and industry minister, opened proceedings for the event – PX Markets Summit Europe – which was organised by Eventus International.
Focus on working out the rules
The summit was, in effect, Gibraltar’s sales pitch. “The value of a Gibraltar licence is that it provides a well regulated home for the PM vertical,” said Lyman. Since licensing its first operator, Predict Street, in the spring and bringing in dedicated rules in July, the territory has authorised a second and is dealing with “a limited number of pipeline applications”, he said.
The guest list says something about where the industry stands. Polymarket and Kalshi, the American prediction market giants, are not among the speakers. Neither is Predict Street. The line-up consists instead of lawyers, compliance consultants, start-ups and harm-reduction groups such as BetBlocker, CERG and the Ethical Gambling Forum.
This is emblematic of an industry still working out its rules rather than one that is chasing customers.
A continent says no
Champions of prediction markets call them engines for aggregating information, but in the eyes of most of Europe’s governing bodies they are seen as bookmaking, only with better branding. In June nine regulators, from Belgium, France, Germany, Italy, the Netherlands, Poland, Portugal, Spain and Switzerland, issued a joint warning against unlicensed platforms during the World Cup, the first time the continent’s gambling watchdogs had acted as a bloc on the matter.
Spain had already blocked Polymarket and Kalshi in May. Last week Mikel Arana, the head of the DGOJ, Spain’s regulator, repeated that unlicensed operators cannot legally serve Spaniards and that their sites will be blocked.
On 4 November Germany’s GGL put prediction markets on the agenda of a roundtable of European regulators in Halle.
ESMA, the EU’s markets watchdog, has warned that some prediction-market contracts may count as binary options, which cannot be sold to ordinary investors in the EU.
Split in Rome
Licensed incumbents are hardly more welcoming. At SiGMA World in Rome last week Francesca Broggi, a vice-president of LOGiCO, an association of Italian online operators, called prediction markets “fairly destructive” for the country’s concessionaires. Her complaint was about fairness as much as harm: Italian operators buy licences around the world and pay ever-rising taxes, whereas Polymarket “doesn’t need to”.
Yet the same panel showed that the fault line does not simply run between incumbents and upstarts. Fiorentina D’Amore of Blockchain.com called for a common EU framework drawing on crypto, financial and gambling law. The product, she said, is “neither fish nor fowl”. Alessandro Brigato of Blockchain Italia argued that concessionaires who embrace prediction markets have “a great opportunity”.
Meanwhile a host of Europe-facing operators have told iGB that they already see enormous potential in the product. Several already have a clear strategy for prediction markets in place should the tides change from a regulatory perspective across the continent.
Small and agile
Lyman thinks the classification fight is the real problem. ESMA’s comparison with binary options, he says, “disregards structural differences”. Europe’s gambling regulators have concluded that sports contracts are gambling. Stablecoins, smart contracts and blockchains raise the question of whether MiCA, the EU’s crypto rulebook, applies. If the contracts are derivatives, MiFID may.
“While the argument rages,” Lyman says, Gibraltar “has been agile enough to fashion a workable regime” with market, consumer and anti-money-laundering protections built in.
He is sceptical that Brussels will follow soon. A single framework could yet emerge, he concedes, but notes that “whereas small states can be agile, the opposite is true in the EU”, especially where some states “may prefer to elongate the debate”. That is a pointed remark from a territory that left the EU with Britain and whose relationship with the bloc is still being reworked.
No passport to Europe
Which raises an awkward question. What can a Gibraltar licence buy on a continent that mostly bans the product? Less than a passport, Lyman admits. A Gibraltar base is only a start, he says: operators “still need to lawfully enter other markets on an incremental basis”, through local licences or commercial partnerships.
The same contract might be licensed as gambling in one country and as a financial service in another. That is an honest answer for investors who hoped Gibraltar might offer a back door into Europe. It does not, and its regulator says so.
Gibraltar has pulled off this trick before. Its online-gambling industry was built by licensing first and persuading others later. Its distributed-ledger regime, launched in 2018, did the same for crypto firms. Whether prediction markets follow depends on whether bigger European markets eventually open their doors. If they do, Gibraltar’s head start will be worth a great deal. If they keep blocking, its licensees will be well regulated and short of customers.
Andrew Lyman is nearing the end of his contract. His successor has not yet been named.