- Polymarket faced bans in Portugal and Hungary, with Nevada and Tennessee actions adding pressure as regulators question event markets and licensing.
- CFTC approved a US return after a $1.4 million fine in 2022, while combined sector volume reached $13.5 billion and 43 million transactions monthly.
- Political betting bans and insider trading concerns rose after a $436,000 trade on Nicolás Maduro’s removal, prompting a draft bill from Rep. Ritchie Torres.
Polymarket entered 2026 under intense scrutiny as regulators in Europe and the United States moved against the fast-growing prediction market platform, even while it attempts a controlled return to the American market. The platform, which lets users trade on the outcome of real-world events using crypto, now sits at the center of a global debate over whether these markets represent financial innovation or unlicensed gambling. Recent actions in Portugal, Hungary, several U.S. states, and fresh concerns over insider trading have pushed the discussion into a new phase, with regulators, lawmakers, and industry figures weighing in on what comes next.
Hungarian and Portuguese bans put Polymarket under European pressure
At the very start of 2026, Polymarket ran into coordinated resistance in Europe when regulators in both Hungary and Portugal moved to block access to the platform, citing illegal gambling activity and unauthorized betting on political events. The Hungarian Supervisory Authority for Regulated Activities announced a temporary ban on the site, arguing that the prediction market operated without the licenses needed to offer games of chance to its residents. The measure currently has a provisional status, but it signals a tougher approach from Budapest toward crypto-based betting products that blur the line between financial markets and gambling services. On the same day, the Portuguese Gaming Regulatory Authority issued its own prohibition, targeting the platform’s services inside Portugal and criticizing the availability of markets on elections and public events. The regulator told local outlet Rádio Renascença that the website is not authorized to offer betting in the country and pointed to national rules that forbid wagers on political events or other real-world happenings, whether they concern domestic or international affairs. Under Portuguese law, operators cannot legally accept bets on outcomes such as presidential races, referendums, or geopolitical developments, which puts the core model of Polymarket in direct conflict with the country’s gaming framework and public-policy choices. These two European interventions land at a time when prediction markets attract record interest ahead of major global elections and geopolitical flashpoints. They also show how different jurisdictions apply very distinct legal categories to the same activity. In Portugal, the primary focus rests on the ban of political betting in any form, while in Hungary the case centers more on the authorization of gambling-like services and the broader supervision of regulated activities. A blog from international law firm CMS stressed that several paths remain possible in Hungary, including the lifting of the temporary block, but it warned that recent enforcement trends suggest the authority may take a firmer stance once it reaches a final assessment of the platform’s activities.
Polymarket faces Nevada and Tennessee enforcement in a growing U.S. market
Across the Atlantic, Polymarket now navigates a complex regulatory landscape in the United States, where federal and state authorities apply overlapping but sometimes divergent rules. In early January, the Nevada Gaming Control Board filed a civil enforcement action in state court, asking for an injunction that would stop the company from offering unlicensed wagering to Nevada residents. The filing argues that the platform effectively operates as a sportsbook without the state approvals required for any gambling entity, particularly around markets that mirror traditional sports betting and event wagering. This Nevada case followed closely on enforcement from Tennessee earlier in the month. The Tennessee sports betting regulator ordered Polymarket, Kalshi, and Crypto.com to close their sports prediction markets and refund all wagers placed by state residents. Officials in Tennessee framed these products as unauthorized sports books that circumvent the licensing and compliance obligations applied to legal betting apps. These actions illustrate a pattern in which some U.S. states treat event-based contracts as gambling even when the operators describe them as financial instruments or data markets. The regulatory pushback arrives despite rapid growth in the prediction-market sector, especially in the run-up to the 2024 U.S. presidential election and other high-profile geopolitical events. According to a November 2025 analysis by Dune and Keyrock, platforms such as Polymarket and its main competitor Kalshi have seen combined monthly volumes surpass $13.5 billion, while processing over 43 million transactions across thousands of markets. These figures highlight how quickly the space has scaled from a niche crypto experiment into a substantial trading ecosystem that moves significant capital and user attention. Kalshi’s leadership has argued that these markets should not fall under gambling rules because users trade “event contracts” instead of placing bets against a house. In an April interview, CEO Tarek Mansour stated that if regulators label such platforms as gambling, they would also implicitly call large segments of the traditional financial system a form of gambling. He described the model as an open financial marketplace in which participants trade against each other, not against a centralized sportsbook. Nonetheless, Kalshi now faces its own challenges, including a class action lawsuit in the Southern District of New York claiming it operates as an illegal and unlicensed sportsbook, underscoring how U.S. law remains unsettled when it comes to event-based derivatives available to retail traders.
Political betting bans, insider trading fears, and the ethics of prediction markets
Beyond licensing questions, critics now focus on two deeper concerns surrounding platforms such as Polymarket: explicit bans on political betting in many jurisdictions, and the risk that insiders can profit from non-public information in a way that undermines trust. Several countries, including Portugal and Taiwan, do not allow wagers on the outcome of political events, seeing them as threats to public confidence in democratic processes. In Taiwan, local authorities have investigated some users of the platform for participating in markets tied to the most recent presidential election, raising questions about whether such activity violated domestic restrictions on election-related gambling. Insider-trading fears escalated after a high-profile trade on Polymarket drew attention earlier this month. A single user reportedly earned more than $436,000 by correctly predicting that former Venezuelan President Nicolás Maduro would be removed from power before January 31. The trader placed the bet only hours before U.S. forces removed Maduro, which led other users and observers to suggest the person may have held advance knowledge of an impending operation. Although markets on geopolitical events aim to aggregate dispersed information into prices that reflect probabilities, this episode showed how closely timed trades can look like exploitation of confidential intelligence rather than informed speculation. The controversy prompted U.S. Representative Ritchie Torres of New York to draft legislation that would bar federal employees from using prediction markets when they possess insider knowledge related to the events in question. His proposal attempts to reconcile the existence of such platforms with long-standing rules that prevent government officials from trading on material non-public information. While the bill targets a specific subset of users rather than the core business of Polymarket, it suggests that lawmakers increasingly view these markets as potential venues for misuse of privileged data, especially when they involve foreign policy or sensitive national-security decisions. These ethical and legal questions strike at the heart of the prediction-market model. Proponents argue that markets can surface collective intelligence, improve forecasting accuracy, and provide transparent signals about public expectations. Yet critics respond that when the subject involves elections, wars, or government decisions, the boundaries between legitimate forecasting, market manipulation, and unethical profit-seeking grow hard to police. By putting a price on political outcomes and military operations, a platform such as Polymarket invites scrutiny not only from regulators but also from citizens who worry that money will distort democratic and diplomatic processes.
Federal thaw, CFTC approval, and the search for a compliant future for Polymarket
While some states tighten their stance, the broader federal climate around prediction markets shows signs of easing, especially as national policy toward crypto shifts. In November, the U.S. Commodity Futures Trading Commission approved the return of Polymarket to the American market after previously banning the platform and imposing a $1.4 million fine in 2022 for regulatory compliance failures. That earlier enforcement centered on the firm’s operation of event-based binary options without proper registration, which the CFTC considered off-exchange swaps available to U.S. users. Since then, the company has worked to create a more limited and compliant offering, excluding certain classes of markets and adjusting its access controls. The approval came in a broader environment shaped in part by former President Donald Trump’s more favorable public stance toward crypto assets and blockchain-based applications. Federal regulators have begun to show cautious openness to structures that treat event contracts as a form of derivatives product rather than pure gambling, so long as platforms adopt strict rules around who can trade, how settlement works, and what categories of events qualify. This federal thaw does not override state authority, but it gives Polymarket a foothold to operate in parts of the country under the umbrella of derivatives regulation instead of gaming law. Industry participants see these developments as a key test of whether blockchain-based markets can mature beyond speculative entertainment into reliable tools for institutions and policymakers. Kevin de Patoul, CEO of market-maker Keyrock, described prediction markets as a revealing experiment in turning collective intelligence into tradable and verifiable data streams. In his view, they demonstrate both the promise of decentralized information gathering and the fragility of such systems when incentives or visibility misalign. He argued that even markets built on trustless protocols still require trusted frameworks that define roles, prevent abuse, and guide how the resulting signals inform decisions in the real world. De Patoul also suggested that the next phase of growth will depend on who can design platforms that keep open access while embedding transparency and compliance directly into their architecture. For Polymarket, this likely means clearer separation between mere participation and governance influence, stricter rules around conflicts of interest, and more robust monitoring for suspicious trading behavior. If these conditions take shape, prediction markets may gradually shift from being seen mainly as speculative venues toward functioning as institutional-grade indicators used by businesses, analysts, and even public agencies. Whether regulators in Europe and various U.S. states will accept this evolution, or instead insist on classifying such platforms as gambling outfits, remains unresolved, and Polymarket’s current legal challenges will play a central role in setting that precedent.
Conclusion
Polymarket now stands at a crossroads as it confronts temporary bans in Hungary, a firm prohibition in Portugal, civil enforcement in Nevada, and earlier shutdown orders in Tennessee, all while it re-enters the U.S. market under CFTC oversight after a $1.4 million penalty in 2022. The platform operates in a space where monthly trading volumes across leading prediction markets exceed $13.5 billion and transactions surpass 43 million, yet fundamental questions still surround its legal status, its exposure to political-betting bans, and the risk that insiders can extract large profits from sensitive information, as shown by the $436,000 Maduro trade controversy. Lawmakers such as Representative Ritchie Torres are already drafting targeted restrictions, and European regulators show little appetite for political wagering, even as federal authorities in the United States tentatively explore a more structured path for compliant event-contract venues. The eventual resolution of these tensions will determine whether Polymarket evolves into a regulated data and forecasting infrastructure or remains a contested platform caught between financial innovation and gambling law, with each new enforcement action or approval sending another signal about the future of prediction markets as a whole.
Disclaimer
The information provided in this article is for informational purposes only and should not be considered financial advice. The article does not offer sufficient information to make investment decisions, nor does it constitute an offer, recommendation, or solicitation to buy or sell any financial instrument. The content is opinion of the author and does not reflect any view or suggestion or any kind of advise from CryptoNewsBytes.com. The author declares he does not hold any of the above mentioned tokens or received any incentive from any company.
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