European Lotteries presses for coherent rules on prediction markets

European Lotteries has called for a coherent regulatory framework that would apply existing rules to emerging prediction market products and prevent regulatory gaps, the association said. The position was set out in a September position paper and discussed at a webinar the association organised on 14 October, which drew almost 300 registrants from Europe and other countries, according to the association.

Luca Turchi of Italy's ADM took part in the webinar alongside Christian Kalb of CK Consulting (France), Glenn Yamagata of the Oregon Council on Problem Gambling (United States) and Claire Pinson-Bessonnet of CPB Avocats, a former official of the French gambling regulator and president of GREF. The association's September paper draws attention to the rapid spread of prediction markets, platforms that allow economic positions to be taken on the outcome of future events, from sports competitions to elections and economic indicators.

According to European Lotteries, the legal classification of these products should be based on their actual characteristics, the economic substance of the transactions and the associated risks, regardless of the commercial name or the technology used. The association said the question concerns in particular the relationship between the EU's MiFID II directive on financial markets and national gambling laws, since contracts linked to future events may fall under financial rules or national betting rules depending on their characteristics. Classification as a financial instrument does not automatically exclude national gambling provisions, the association said.

Piet Van Baeveghem, secretary general of European Lotteries, said: "I mercati di previsione si stanno sviluppando rapidamente e la regolamentazione deve tenere il passo". He added: "La posizione di EL è semplice: attività che presentano rischi simili dovrebbero essere soggette a tutele simili".

The association also referred to the recent position of the European Securities and Markets Authority (ESMA), which recognised that contracts on future events may also be classified as bets under national laws. European Lotteries set out four principles to guide authorities: classification of products on the basis of actual characteristics and risks, safeguarding national competences on gambling, technological neutrality of rules and greater coordination between financial authorities and gambling regulators. On that basis, the use of blockchain, smart contracts or tokenisation systems should not change the regulatory obligations applicable to the activities carried out, the association said.

According to the association, the 14 October webinar confirmed growing interest in the lottery sector in the implications of prediction markets. European Lotteries said it intends to continue the discussion with its members and contribute to the European regulatory debate, supporting coherent application of existing rules and greater cooperation between competent authorities.