The European Securities and Markets Authority has warned that prediction markets are “rife with inside trading,” publishing a dedicated risk-monitor chapter as Riot Games simultaneously holds sponsorship talks with sector operators Kalshi and Polymarket ahead of the League of Legends World Championship in October.
ESMA cited three concrete episodes: new wallets made $1.2 million hours before February’s strike on Iran; by May, Bubblemaps had traced nine linked accounts to $2.4 million of Iran bets that won 98% of the time. A U.S. Army master sergeant was charged over $400,000 in Polymarket profits tied to the capture of Venezuelan president Nicolás Maduro, while suspected tampering with weather sensors used to settle Polymarket contracts prompted Météo-France to file a police complaint in April. The regulator said platform responses are “largely reactive,” beginning after the profits are taken.
On the sponsorship front, Riot Games is evaluating prediction market deals with both platforms, Bloomberg reported on Sept. 11. Riot spokesperson Joe Hixson said the company is focused on “safeguarding competitive integrity, potential value for teams, impact on the fan experience, and alignment with our broader ecosystem goals.” Any approved sponsor would need to use official betting data through Riot partner GRID Esports, which already partnered with Polymarket in June. Riot has not committed to either Kalshi or Polymarket.
ESMA added that prediction markets have gained little traction in the EU because binary options rules bar selling event contracts to retail investors. Event contracts can qualify as financial instruments under MiFID II, fall under MiCA, or count as gambling under national law. Meanwhile, volumes have surged since ESMA’s data was collected: Kalshi took $31.5 billion in June monthly volume, while sports represented 73% of Kalshi’s volume. The regulator also cited a Wall Street Journal finding that 67% of Polymarket gains went to 0.1% of accounts and a Bloomberg analysis that most users lose money.
Washington has taken the opposite course, with the CFTC defending its jurisdiction against states and proposing to bar war and assassination contracts. Legal battles continue across U.S. states, with a Washington state judge in July blocking Kalshi from offering sports prediction markets there and Baltimore suing both Kalshi and Polymarket in August over unlicensed sports betting. No Riot sponsorship agreement with either platform has been announced.
