EU regulator says some prediction market contracts now fall under financial law

The European Securities and Markets Authority warned on 3-4 July that certain prediction-market event contracts may already breach the EU's long-standing ban on marketing binary options to retail clients. ESMA's position is that a product's commercial label is irrelevant under MiFID II; what determines its legal treatment is whether the contract functions as a derivative. Platforms offering investment-style services tied to such contracts, the regulator said, require MiFID II authorisation regardless of how the product is branded.

The statement lands just over two weeks after nine national gambling regulators pledged coordinated action against the same class of platforms ahead of the 2026 FIFA World Cup, giving authorities outside the securities remit a formal legal basis to act in parallel. It does not create new law, but it substantially narrows the room platforms have to argue that rebranding a binary-style product changes its regulatory character.

The EU currently has no unified framework for prediction markets. Three regimes apply unevenly across the bloc: MiCA for crypto-settled contracts, MiFID II for those resembling financial derivatives, and national gambling law for the rest — a split that has produced sharply different outcomes by member state. Polymarket is reported to be restricted or banned in at least seven member states, including France, Belgium and Poland, while remaining accessible in Germany, Spain and Denmark. Gibraltar remains the only European jurisdiction to have issued a dedicated prediction-market licence, granted to ADI Predictstreet in April.

Legal advisers are telling platforms to assess each contract individually rather than rely on a single compliance strategy across markets, warning that ESMA's intervention makes case-by-case classification, rather than a bloc-wide carve-out, the likely near-term reality.