ESMA’s September report is a risk assessment, not a new blanket prohibition on prediction markets. The regulatory position depends on what an event contract references and how it is structured. Some contracts qualify as financial instruments under MiFID II. Others based on distributed ledger technology may fall under the EU’s crypto-asset framework when they are not financial instruments. National gambling law can also apply.
Where a contract is a financial instrument with a binary payout, existing national measures on binary options can prohibit its marketing, distribution or sale to retail clients. ESMA set out that position in its earlier guidance on binary event contracts. The regulator also says that offering investment services involving qualifying contracts in the EU requires investment firm authorisation, including when distribution is limited to professional clients.
European gambling authorities have examined the same activity from a different angle. A joint warning from nine gambling regulators focused on licensing and consumer safeguards for platforms serving their national markets. Firms cannot determine obligations from a product label alone. Each contract, target jurisdiction and distribution channel needs its own assessment.
ESMA noted that major platforms restrict users in some EU countries, but questioned why those restrictions do not cover every member state and whether controls against virtual private network access work in practice. For operators and partners, the immediate issue is therefore practical. They must know which customers can access a product, which authority oversees it and whether their controls can support that position.
