Prediction Markets Under The Regulatory Spotlight: ESMA’s Public Statement Confirms That Existing Binary Options Prohibitions Apply To Event Contracts

EU RegCORE Client Alert | Capital Markets Union + Savings and Investment Union

On 3 July 2026, the European Securities and Markets Authority (ESMA) published a Public Statement on the application of the national product intervention measures on binary options to event contracts (the Public Statement),¹ addressed to firms and national competent authorities (NCAs) across the European Union (EU).

The intervention responds to the increased offering of “event contracts” and the growth of "prediction markets"—products with a binary financial outcome (fixed payout or nothing) depending on a yes-or-no answer to a question about a future event. ESMA confirms that event contracts qualifying as MiFID II financial instruments are derivatives falling within the scope of permanent national product interven-tion measures on binary options, now in place in all EU Member States. This means the marketing, distribution or sale of such products to retail clients is prohibited.

The Public Statement does not create new law. It is a supervisory convergence tool—a formal re-minder that the existing prohibition framework, established by ESMA Decision (EU) 2018/795 and now embedded in permanent national measures, captures this newly prominent product category. Regulat-ed firms face an immediate priority: assessing whether products currently offered or planned fall within the scope of the national binary options measures and ensuring MiFID II authorisation and conduct requirements are met.

Key elements include:

• What. Event contracts with a binary outcome qualifying as MiFID II financial instruments are captured by the existing national binary options measures. Retail marketing, distribution or sale is prohibited; even non-retail distribution requires MiFID II authorisation.
• When. Published 3 July 2026 with immediate effect as supervisory guidance. The underlying national measures have been in force across all EU Member States since 1 July 2019.
• Who. All firms offering, distributing or marketing event contracts or products with similar binary characteristics, and NCAs across the EU. This encompasses investment firms, trading venue operators, prediction market platforms and any entity providing investment services in relation to qualifying event contracts—whether EU-established or providing services cross-border into the EU.
• Where. All 27 EU Member States, each NCA having adopted permanent measures mirroring the original ESMA prohibition.
• Why. ESMA and NCAs have observed rapid growth of prediction markets and increasing retail participation globally. Firms may be offering event contracts to EU retail clients without appreci-ating these products are caught by the existing prohibition.
• How. Firms must conduct a careful legal analysis of every product with binary payout character-istics to determine MiFID II financial instrument status and product intervention scope, adhering to the overarching obligation to act honestly, fairly and professionally in clients’ best interests.

Footnote

1 Available here.

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