The Dutch gambling regulatory authority, KSA, has classified Polymarket as an illegal gambling operation and ordered it to cease operations, imposing a weekly fine of 420,000 euros.
(Background: Using Polymarket as a cash machine! Making $80,000 in one day through 48 ultra-short-term prediction trades)
(Additional context: The two giants of prediction markets, Kalshi and Polymarket—“not doing their proper job”—behind the scenes: opening grocery stores offline just because they’re too anxious?)
Table of Contents
- A Fundamental Question: Are Prediction Markets Gambling or Financial Instruments?
- Europe’s Regulatory Iron Curtain: From Individual Cases to Trends
- The Mirror Across the Atlantic: Trump Administration’s Full Support
- The End of Regulatory Arbitrage
On the 20th, the Dutch gambling regulator KSA issued a penalty order to Polymarket’s operator Adventure One QSS, ruling that it provided “illegal gambling services” to Dutch users without holding a local gambling license, and requiring all Dutch-facing activities to stop within four weeks.
Failure to comply will result in a fine of 420,000 euros per week (about $462,000), with a maximum cumulative fine of 840,000 euros.
KSA Director Ella Seijsener stated: “Such companies’ bets are not permitted in our market under any circumstances.” The regulator also highlighted social risks, especially the potential influence of prediction markets on elections.
A Fundamental Question: Are Prediction Markets Gambling or Financial Instruments?
Polymarket and its competitor Kalshi have consistently maintained that prediction markets are not gambling but “financial instruments.” Users buy “event contracts,” which are essentially binary options on specific outcomes. Contracts are traded between users; the platform itself is not the bookmaker. This structure is fundamentally different from betting on a fixed odds site.
However, Dutch law does not see it that way. According to Article 1(1)(a) of the Dutch Gambling Act, any “placing of money on uncertain events to win prizes” constitutes gambling, regardless of whether it’s called a prediction market, event contract, or information discovery tool—the name does not alter legal classification.
This legal logic may seem blunt at first glance, but it touches on a question prediction market supporters are reluctant to answer directly: if a retail investor bets $100 on whether Trump will step down before 2028, how is that fundamentally different from betting on the same event on a gambling site?
The answer might be differences in contract structure, price discovery functions, or market efficiency, but to a losing $100 retail investor, the outcome is exactly the same.
Europe’s Regulatory Iron Curtain: From Individual Cases to Trends
The Netherlands is not the first. France, Italy, Belgium, and Romania have already blocked access to Polymarket. Germany, the UK, Portugal, and Hungary face similar regulatory pressures.
Underlying this is a structural reason: EU member states have highly decentralized gambling regulation, each enforcing laws independently. Overall, Europe’s attitude toward prediction markets is tightening, not loosening.
The reasons are consistent: operating without a license, influencing elections, protecting consumers—prediction markets’ survival space in Europe is shrinking across countries.
The Mirror Across the Atlantic: Trump Administration’s Full Support
In stark contrast to Europe’s bans, the US federal level is actively supporting prediction markets.
CFTC Chair Michael Selig, who took office in December 2025, has been clear. In a Wall Street Journal article, he declared: “The CFTC will no longer stand by and watch overzealous state governments undermine our exclusive jurisdiction.”
His stance is driven by the fact that nearly 50 legal cases targeting prediction markets are ongoing in the US. The Nevada Gaming Control Board issued a temporary restraining order against Kalshi. States like New Jersey, Maryland, and Tennessee have also issued cease-and-desist notices. Utah Governor Spencer Cox directly challenged the CFTC: “The prediction markets you defend so desperately are pure gambling.”
The CFTC’s legal argument is that contracts in prediction markets are essentially commodity futures, falling under federal jurisdiction, and states have no authority to intervene via gambling laws. In May 2025, the CFTC withdrew its appeal against Kalshi’s election market ban; in September, it issued a non-enforcement letter to Polymarket, exempting it from certain reporting and record-keeping obligations; and in December, it approved regulatory pathways for Polymarket and Gemini.
Polymarket is also actively positioning itself in the US market, having acquired licensed derivatives exchange QCX for $112 million to pave the way for a formal return to the US.
The End of Regulatory Arbitrage
Polymarket’s story exemplifies a recurring pattern in the crypto industry: using technological innovation to bypass regulatory boundaries until regulators catch up.
In Europe, prediction markets are classified as gambling and face outright bans. In the US federal system, they are classified as financial instruments and enjoy regulatory protection. At the state level, they are again classified as gambling and face lawsuits. The same product, three different classifications, three different fates.
This regulatory arbitrage strategy—operating in the most permissive jurisdiction while opening to global users—has been effective in the short term. Polymarket’s surge during the 2024 US election proved this.
But as more countries begin to actively enforce laws, the technical defenses like geographic blocking become a fragile barrier that can be easily pierced.
Note: Dutch regulators logged into Polymarket using Dutch IP addresses, successfully created accounts, deposited €10 via Dutch bank cards, and placed bets on political markets, including contracts related to Dutch elections. In other words, Polymarket’s geographic restrictions are effectively meaningless.
For Polymarket, globalization is both an advantage and a vulnerability: it must win the classification battle in every market, while regulators only need to win once in their own jurisdiction.
