Europe Taxes Crypto Like A Grim Gossip While US Welcomes Perps Like A Long-Lost Heir

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European regulators have taken to classifying prediction markets as a form of gambling, rather than as legitimate financial products. This classification determines which rules apply, which licenses are required, and – most critically of all – how any revenue generated from them shall be taxed, to the great disadvantage of the platforms in question.

A formal EU-wide gambling tax would harden that classification at the bloc level, making it as difficult to shift as a stuck door. If prediction markets are taxed as gambling under the EU’s own-resources framework, it becomes significantly more difficult for platforms like Polymarket or Kalshi to later argue in European courts that they are, in fact, financial instruments under MiCA or any other regulatory framework, no matter how many sensible lawyers they may employ.

The Proposed Crypto Transaction Tax Adds Yet Another Layer Of Unpleasantness

The gambling levy is, alas, only part of the rather unpleasant picture. The Commission’s proposed 0.1% crypto transaction tax would apply broadly across all digital asset trading – not merely to prediction markets or perpetual futures, but to every small transaction a poor investor might make, no matter how trivial the sum.

The Commission itself has been kind enough to acknowledge the uncertainty of these figures, warning that potential revenue from crypto taxes is nigh on impossible to calculate with any accuracy, due to a lamentable lack of reliable data. But the figures they did produce – €3 to €4 billion, or $3.5 to $4.7 billion, per year from the transaction tax alone – suggest that the EU sees crypto trading volume as a rather significant untapped revenue source, like a rich aunt’s hidden jewellery box that no one has thought to look behind until now.

For the crypto industry, the great concern is that a transaction-level tax would make EU-based trading significantly less competitive when compared to jurisdictions that do not impose similar levies. Combined with the gambling classification for prediction markets and the ongoing platform bans, this full package of proposals creates a regulatory environment that could well push crypto derivatives liquidity further offshore – which is, of course, the exact opposite of what the US is currently trying so hard to achieve, like a man running a race in the opposite direction to all the other runners.

The Question Of Where Liquidity Shall Next Repair

This divergence matters a great deal, for it is a truth universally acknowledged by all those who deal in crypto, that liquidity follows regulatory clarity as a moth follows a candle. Crypto exchanges processed an estimated $86 trillion in perpetual futures volume last year, according to CoinGecko data, and the vast majority of that activity occurred on offshore platforms that sit outside both U.S. and EU regulatory reach, like a rogue relative who refuses to attend family gatherings.

The U.S. strategy, under the leadership of CFTC Chairman Selig, is to capture a fair share of that liquidity by bringing perps onshore, into the regulated embrace of official exchanges. The EU’s emerging strategy, meanwhile, appears to be the exact inverse: treat these products as a form of gambling, tax the operators into the poorhouse, and restrict platform access so thoroughly that only the most determined of users shall be able to find them.

For platforms like Kalshi and Polymarket, who are already competing fiercely to dominate the U.S. perps market, and for exchanges like Coinbase, who have just gained CFTC clearance for institutional crypto derivatives access, the EU’s current direction may simply confirm what they have long suspected: that Europe is not, and never shall be, their target market. The result, if these plans go forward, shall likely be a two-track global derivatives landscape: one where U.S.-regulated platforms absorb institutional perps liquidity under the careful oversight of the CFTC, and another where Europe taxes, restricts, and effectively cedes the entire market to other jurisdictions – all whilst collecting billions in revenue from whatever small crumbs of activity remain, like a miser who counts his coppers whilst his neighbours spend their gold.

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2026-05-30 15:19