ESMA warned prediction market contracts offered in the EU may already fall under existing financial rules, potentially bringing them within the bloc’s long-standing retail ban on binary options.
ESMA warned that prediction market contracts offered in the European Union may already be captured by existing financial rules, reinforcing its view that firms cannot avoid derivatives regulation by relabeling binary-style products as event contracts. The regulator’s stance points to a substance-over-form test focused on how these instruments work in practice rather than how they are marketed. That matters for platforms offering yes-or-no outcome contracts, because products deemed to function like binary options could potentially face the EU’s long-standing retail ban on such instruments.