ESMA warns many prediction market event contracts already face EU retail ban
The European Securities and Markets Authority (ESMA) has warned that many prediction market contracts may already fall under existing restrictions on binary options, saying companies cannot avoid financial regulations simply by marketing them as “event contracts.” In a public statement on Friday, the regulator reminded companies that event contracts meeting the definition of financial instruments are already prohibited from being marketed, distributed or sold to retail investors under national measures implementing ESMAs 2018 binary options restrictions. ESMA said the assessment depends on a contracts characteristics rather than how it is marketed, adding that event contracts with binary outcomes and fixed payouts are likely to qualify as financial instruments subject to the restrictions. The regulator also told companies that offering qualifying event contracts to professional or institutional clients still requires authorization under the EUs Markets in Financial Instruments Directive, or MiFID II, regardless of whether retail investors are excluded.Excerpt from ESMAs July statement on event contracts. Source: ESMA The statement does not introduce new restrictions. ESMA said it issued the reminder after observing increased offerings of event contracts and the rapid growth of prediction markets, noting that qualifying binary options have already been subject to national restrictions across the EU since 2018. Related: StanChart joins ESMAs