Europe’s top securities regulator has a message for prediction markets: you can’t dodge financial rules by calling your product an event contract.
ESMA issued a statement Friday reminding companies that many event contracts already qualify as binary options under existing EU restrictions. That means they can’t be marketed, distributed, or sold to retail investors. Period.
The regulator says it’s about the contract’s actual characteristics — not what you decide to call it. If it has a binary outcome and a fixed payout, it’s probably a financial instrument. And those have been restricted since 2018.
Even if you’re only targeting professional or institutional clients, you still need authorization under MiFID II. No shortcuts.
ESMA says it’s acting now because prediction markets have been growing fast. This isn’t a new rule — it’s a reminder that the old rules already apply.
Across the Atlantic, the fight over prediction markets is getting uglier. Eleven US states have taken legal action against platforms like Kalshi and Polymarket. Nevada blocked Kalshi. Arizona brought criminal charges. The CFTC insists it has exclusive jurisdiction over event contracts, but state regulators disagree.
The battle could end up at the Supreme Court. A Massachusetts judge just allowed state authorities to amend their complaint against Kalshi on June 30. Gaming organizations are pushing Congress to explicitly ban sports-related event contracts in the CLARITY Act.
One thing’s clear: the regulatory landscape for prediction markets is getting tighter on both sides of the Atlantic.
