The European Securities and Markets Authority (ESMA) devoted three chapters of its 2026 first-half Trends, Risks and Vulnerabilities Report to digital assets and prediction markets. It warned that issuing different tokenized versions of the same stock could fragment liquidity. The market value of tokenized stocks rose from about €300 million to nearly €1.9 billion over 18 months. ESMA said offshore structures marketed as being backed one-to-one by shares are effectively packaged securities, with ownership recorded off-chain and no unique source of truth on the blockchain. Multiple intermediaries add complexity and risk, while many transactions still do not achieve atomic settlement, in which securities and funds are exchanged simultaneously. ESMA also warned that closer links between crypto assets and traditional finance could create risks, identified potential benefits of tokenization, and said prediction markets remain underdeveloped in Europe because major platforms generally lack required EU licenses.