Could prediction markets work in Lithuania?

The growth of prediction markets raises a new question for Europe

Prediction markets have become a much more visible part of the global fintech and forecasting ecosystem in recent years.

In these markets, participants estimate the probabilities of future events – from economic indicators and central bank decisions to elections, technologies or other clearly defined events.

But their expansion raises a fundamental regulatory question:

What is a prediction market from a legal perspective – a financial market, a betting service, an information aggregation mechanism, or a completely separate category?

For Lithuania, this question is currently more strategic than practical. The country does not yet have a separate regulatory regime for prediction markets.

However, as the global industry grows, the discussion is becoming relevant for the European Union as well.

On 3 July 2026, the European Securities and Markets Authority (ESMA) issued a special statement on prediction markets and so-called event contracts.

This is an important signal: prediction markets are no longer just an academic forecasting topic – European financial market regulators are beginning to actively assess their legal status.

There is no single legal model for prediction markets

To discuss the regulation of prediction markets, we must first abandon one false assumption:

Not all prediction markets are the same.

There are very different models.

Play-money forecasting

Participants forecast using virtual points or a reputation system, without risking real money.

Such systems are primarily used for forecasting experiments, research, education, or internal organisational forecasting.

Prediction tournaments

Participants submit probabilistic forecasts and compete on their accuracy.

These systems do not necessarily involve traditional trading or financial contracts.

Real-money prediction markets

Participants risk real money by buying or selling positions whose value depends on the outcome of a future event.

This is where the biggest regulatory questions arise.

Event contracts

A contract may have, for example, two outcomes:

• YES – the event occurred.
• NO – the event did not occur.

If the contract involves a monetary payout, its legal classification becomes especially important.

Therefore, the discussion should not begin with the question:

"Are prediction markets legal?"

But with a much more precise one:

"Which prediction market model do we want to regulate?"

ESMA's 2026 position: the most important signal for Europe

On 3 July 2026, ESMA issued a statement in response to the growing global popularity of prediction markets and the increasing interest of retail investors in event contracts.

ESMA describes event contracts as products whose financial outcome is binary – a fixed payout or no payout – depending on the answer to a question about a future event.

But the most important ESMA conclusion is different:

not every event contract is automatically a financial instrument.

Whether a specific contract falls within financial markets regulation depends on the event it is linked to and how the product itself is structured.

ESMA also notes that certain event contracts may fall under national gambling laws.

This means that prediction markets in Europe cannot be treated as a single universal product category.

A specific legal analysis of the product is required.

Why the boundary between financial instrument and gambling matters in Lithuania

Lithuania already has a broad definition of gambling in its legal system.

The current version of the Law on Gambling of the Republic of Lithuania (2026) provides that gambling may be considered a game or mutual betting in which participants, seeking a monetary prize, risk the amount they stake, and the result is determined by chance, an event, or the result of a sports competition.

Therefore, a real-money prediction market where a person risks money on the outcome of a future political, economic, sporting or other event cannot automatically be treated as just a 'forecasting platform'.

Its specific legal classification would need to be determined.

This gives rise to two potentially different regulatory directions:

• gambling regulation
• or
• financial markets regulation.

For some products, additional EU and national law areas may also be relevant.

If the product were classified as gambling

Remote gambling is already a regulated and licensed activity in Lithuania.

Information published by the Gambling Supervisory Authority indicates that organising remote gambling requires the appropriate licence, a permit to organise remote gambling, and an organisation regulation approved by the supervisory authority.

Remote gambling systems are also subject to technical requirements.

This means that if a real-money prediction market were classified as remote betting or another gambling category, simply building the technology platform would not be enough.

Regulatory requirements would arise relating to:

• licensing;
• permits;
• technical systems;
• customer identification;
• responsible gambling requirements;
• anti-money laundering;
• consumer protection;
• supervision and accountability.

Lithuanian authorities also have the right to restrict access to remote gambling websites that operate in the Lithuanian market without the required licence and permit.

Therefore, a foreign prediction market platform's licence in another country does not automatically mean it has the right to offer real-money services to Lithuanian consumers.

What if the event contract were a financial instrument?

Here the situation becomes more complex.

ESMA's 2026 position indicates that some event contracts, depending on their underlying and structure, may fall within the scope of financial instruments regulation.

In that case, the question would no longer be solely about Lithuania's gambling regulation.

EU financial markets law, product classification, trading infrastructure, investor protection, and relevant licences would need to be analysed.

In Lithuania, the main financial market supervisory authority is the Bank of Lithuania.

Therefore, an early dialogue with the Bank of Lithuania would be very important for a platform seeking to create an event-contract product with financial instrument characteristics in Lithuania.

But the product name 'prediction market' or 'event contract' alone does not determine its regulatory category.

The economic substance of the product and its specific legal construction are important.

Lithuania has one potentially interesting instrument – the Regulatory Sandbox

The Bank of Lithuania operates a financial innovation testing environment – the Regulatory Sandbox.

It is intended for potential and existing financial market participants who want to test new financial innovations in Lithuania in a controlled environment under the supervision of the Bank of Lithuania.

The Bank of Lithuania lists several key criteria:

• innovativeness;
• benefit to consumers or society;
• objective need to test the product in a real environment;
• adequate readiness for testing;
• intention to continue developing the financial service in Lithuania.

This does not mean that a prediction market would automatically be accepted into the Sandbox, or that such a system would automatically be considered a financial service.

However, if an innovative event-contract model with financial instrument characteristics were being developed, the Regulatory Sandbox could be one institutional avenue to start the discussion.

Lithuania could start with something other than real-money markets

When discussing prediction markets in Lithuania, there is no need to immediately start with contracts traded for real money.

There is a much broader forecasting ecosystem.

Lithuania could experiment with:

Play-money prediction markets

Participants use virtual points, and the results are used for research and forecasting method analysis.

Forecasting tournaments

Participants regularly assess the probabilities of political, economic, technological or other events.

Their forecasts are later evaluated using Brier Score, calibration, or other methods.

University experiments

Prediction markets can be studied in economics, political science, statistics, psychology, and data science contexts.

Internal organisational prediction markets

Companies can use forecasting methods to forecast project deadlines, sales, product launches, or other business results.

Public policy forecasting experiments

It is possible to study how experts, the public, and different forecasting methods evaluate economic or social scenarios.

Such experiments would allow Lithuania to start building forecasting competence before tackling the more complex regulatory questions of real-money event contracts.

Why could Lithuania be an interesting place for such experiments?

Lithuania already has an internationally visible fintech ecosystem and financial innovation regulatory infrastructure.

In its strategic directions, the Bank of Lithuania points to the development of a regulatory and supervisory ecosystem conducive to financial technologies.

Initiatives such as LBChain – a regulator-developed technological sandbox for blockchain solutions – have also been created in the country.

This does not mean that Lithuania should automatically choose prediction markets as a new fintech priority.

But there is an institutional basis for discussing new financial technology models.

Lithuania's size can also be an advantage for experiments.

A relatively small, digitised country with an active fintech sector, universities and regulatory institutions could become a suitable environment for small-scale forecasting research.

The Baltic states should look beyond a single national market

The Lithuanian market alone is small for the prediction markets industry.

But:

Lithuania + Latvia + Estonia

creates a much more interesting experimental and regional space.

The Baltic states share similar interests:

• digital economy;
• fintech;
• cybersecurity;
• geopolitical risk assessment;
• energy;
• economic resilience;
• public sector digitalisation.

Therefore, a forecasting ecosystem could be built on more than just a national basis.

For example, it would be possible to create:

• Baltic Forecasting Tournament
• or
• Baltic Prediction Markets Research Network.

Universities, researchers, technology companies, and forecasting communities from all three Baltic states could participate.

What would a prediction markets ecosystem in Lithuania actually need?

In LPMI's view, at least five elements would be needed.

1. Clearer legal classification – we need to understand when a specific event contract would be: gambling; a financial instrument; or neither of these categories. This must be assessed based on the specific product's construction, not just its name.
2. Dialogue between institutions and the market – the discussion should potentially involve: the Bank of Lithuania; the Gambling Supervisory Authority; the Ministry of Finance; financial and technology law experts; universities; forecasting researchers; and technology companies.
3. Experimental environment – before creating large-scale commercial products, it would be useful to run play-money and academic forecasting experiments.
4. Data and result evaluation – forecasting systems should be evaluated not by their popularity, but by their actual forecast accuracy, calibration, and information value.
5. International cooperation – prediction markets are developing globally. Therefore, Lithuania would benefit from learning not only from US models but also from actively participating in the emerging European discussion.

Does Lithuania need its own Kalshi or Polymarket?

Not necessarily.

This is not the most important question.

Much more important is understanding whether prediction markets and collective forecasting methods can provide Lithuania with useful new tools.

Perhaps a regulated real-money prediction market will emerge in the future.

Perhaps B2B forecasting will be more promising.

Perhaps the greatest value will be in academic research.

Perhaps prediction markets data will become another source of information for media and public policy.

At this stage, it is too early to choose one model.

But it is not too early to start studying it.

LPMI position

The Lithuanian Prediction Markets Institute does not consider any single prediction market regulatory model to be correct in advance.

Our goal is to promote a discussion grounded in data, research, and international experience.

Lithuania does not need to blindly copy the US or any other jurisdiction's model.

But it would be meaningful to start a professional dialogue about:

• how to classify different prediction market models;
• what risks they create;
• what benefits they could offer;
• what consumer protection measures would be needed;
• where to start with low-risk forecasting experiments;
• and what role Lithuania could play in the emerging European prediction markets ecosystem.

The most important question today is not:

"Should we allow prediction markets in Lithuania?"

It is worth first asking:

"What kinds of prediction markets could be useful for Lithuania, how should they be classified, and under what conditions could they operate responsibly?"

This is the question from which a serious Lithuanian discussion about prediction markets could begin.