Europe's securities regulator says many prediction-market event contracts already fall under the EU's retail ban on binary options, making the restriction live law rather than a proposed rule. Tokenized contracts may instead be caught by the bloc's crypto framework, leaving platforms such as Kalshi and Polymarket a narrow path to European retail users.
The European Securities and Markets Authority (ESMA) has told the market that many prediction-market event contracts are already barred from EU retail sale under existing binary-options rules — not a rule still to come. In a public statement issued on July 3, the regulator set out how current EU law applies to event contracts, the yes-or-no instruments that underpin prediction markets.
Two tracks, both already law
ESMA's reasoning turns on classification. Event contracts whose underlying question relates to an asset listed in Section C(4) to (10) of Annex I of MiFID II — the directive's derivatives categories — count as financial instruments. Where a contract qualifies, ESMA said, it classifies as a derivative and, given the binary outcome, falls within the national product intervention measures on binary options that prohibit their marketing, distribution or sale to retail clients.
That prohibition is not new. Binary options have been effectively banned for retail investors across the EU since 2018, when ESMA introduced a temporary intervention that member-state regulators later made permanent through their own measures. Because the ban rests on rules already in force, no new legislation is needed to apply it.
Tokenized contracts and the MiCA question
ESMA also noted that event contracts that are tokenized and do not qualify as financial instruments may instead fall under the EU's Markets in Crypto-Assets (MiCA) framework, which carries its own authorization and disclosure requirements. Some contracts could also fall under national gambling law, depending on how a member state treats them.
For platforms with European ambitions, ESMA narrowed the choices to restructuring products so they sit outside financial-instrument classification, obtaining MiFID II authorization, or accepting that the EU retail market stays closed. As ATH21 chief executive Cris Carrascosa said on social media, the statement read less as a new restriction than a reminder of existing law's reach, leaving the hard part in the case-by-case analysis of each product's actual characteristics.
Source: Bitcoin.com News
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