Kalshi and Polymarket sell event contracts. Positions are funded in stablecoins, settled by code, and held in wallets rather than accounts. US states spent 2026 arguing over what that is: a financial product, or a bet with extra steps.
Germany answered the question last September and has not revisited it.
The answer matters for anyone pricing European expansion. Spain blocked Polymarket and Kalshi in May because neither held a Spanish license, which can be obtained. Germany is a different problem. There is no license to apply for, and the crypto rails these markets run on change what the regulator can do about it.
Crypto Rails Change What Germany Can Reach
Enforcement needs someone to serve. Authorities can fine companies and seize domains. A deployed contract has no registered office, so the pressure moves to the parts of the stack that do: front ends, hosting, market makers, and the media selling the traffic.
Payment blocking has the same problem. It works when a bank or card scheme sits in the middle of a deposit. Settlement in stablecoins removes the middle.
So Germany does not chase foreign operators through foreign courts. It withholds the license and works on distribution instead: advertising, payment processing, affiliate partners, and a public safelist of authorized sites that any German user can check a platform against.
That model has limits, and they showed up in court. In March 2025, the Federal Administrative Court ruled against the GGL, finding the treaty gave it no sufficient basis to make internet access resellers block gambling sites. The regulator now works through hosting providers and has asked lawmakers for wider powers.
It still works on volume. Research commissioned by the GGL and carried out by the Blockchain Research Lab put the channelization rate at 77.03%, so roughly three-quarters of online gambling revenue reaches licensed sites.
The rest is not small, and it is growing. Unlicensed platforms took an estimated €547 million in gross revenue in 2024, up from €466 million a year earlier, and around 22.4% of all stakes.
Germany Closed the Question in September 2025
On 5 September 2025, the Gemeinsame Glücksspielbehörde der Länder (GGL) published a warning about betting on public events. The GGL is the joint gambling authority of Germany’s 16 federal states. The notice, named Polymarket and cited wagers on the course of the war in Ukraine.
Its conclusion was short. Under the 2021 State Treaty on Gambling, the framework all 16 states signed in October 2020, bets on political elections, court decisions, natural disasters, and similar non-sporting events cannot be licensed in Germany at all.
German licenses cover sports betting with verifiable results. Everything else falls outside, and no application route exists.
The line the regulator drew is about the outcome, not the technology. A referee and a scoreboard settle a football result. An election result, a court verdict, or the end of a war is not, at least not on terms a German license can reference.
The GGL added that organizing, brokering, advertising, and taking part in such bets are all punishable. That reaches users and marketing partners, not only operators.
The US Preemption Argument Does Not Travel
American cases turn on which level of government makes the decision. A federal judge blocked Minnesota’s prediction market ban in July after finding that federal commodities law likely displaced parts of the state statute.
Germany offers no similar opening. The GGL looks at the wager, not the wrapper. Money is staked, the outcome is uncertain, and the event is not a sporting fixture. A contract settled by code fits that description as neatly as a betting slip.
Platforms can argue the other side and claim they sell financial products, which would put them under BaFin, the German financial supervisor. That trades one missing authorization for another.
Germany is not alone here. The International Association of Gaming Regulators has tracked the same conclusion in the United Kingdom, the Netherlands, Singapore, and New Zealand. The US, where the CFTC route gives platforms a federal foothold, is the exception.
What a German License Would Demand?
Suppose the category opened tomorrow. The license conditions would still be hard for a prediction market to carry.
Deposits remain capped at €1,000 per month, and the cap applies across all licensed sites rather than to each account. Slot stakes remain limited to €1 per spin with a five-second pause between spins. Operators check the OASIS self-exclusion register, verify that users are 18 or older, and display the BZgA helpline.
Live dealer games are licensed state by state, and so far, only Bavaria offers them. Tax is 5.3% of every stake rather than a share of revenue. OnlineGambling.com documents how those rules work across the licensed German market, including the deposit limits and the stake-based tax.
Why On-Chain Prediction Markets Face Compliance Challenges?
Two of those conditions are particularly awkward for on-chain markets. A shared deposit cap assumes that licensed sites can see what a user has deposited elsewhere, whereas wallets carry no such history.
Self-exclusion is the harder one. A licensed operator checks the register first and refuses the stake second, so the block happens before any money moves. On-chain, the order remains reversed. A signed transaction that reaches the contract executes on its own terms, and by the time anyone can look up the wallet, the position exists.
There are only two places to put the check. One is the interface, which a user can bypass by going directly to the contract. The other is the contract itself, which requires traders to whitelist wallets against a national register before they can trade. That is a permissioned market wearing on-chain clothing, and it differs greatly from how developers build these platforms today.
Germany wrote these rules for something slow and traceable. Prediction markets run on continuous positions, fast settlement, and open order sizes, so a license would mean rebuilding the product rather than adapting it.
The 2026 review of the State Treaty is the next thing to watch. It reopens the enforcement powers that the GGL says it lacks, and the question of what belongs inside the licensed market. That is where event contracts either get their own category or remain outside it.
