Event Contract Marketing in Europe May Require EU Authorisation, ESMA Says

The useful part

Platforms marketing or selling event contracts in Europe may need authorisation under financial, crypto-asset or national gambling rules, ESMA said. In the latest Trends, Risks and Vulnerabilities report, regulator added that the largest prediction-market platforms do not currently hold the EU permissions that may be required for those activities. Three Possible Regulatory Routes An event contract may fall under MiFID II if it is tied to a financial or commodity underlying covered by the directive.

How it works

• Europe does not have a single prediction-market rulebook.
• When a contract does qualify as a financial instrument, firms arranging, marketing or selling it in the EU would need the relevant MiFID II authorisation.
• Financial-instrument event contracts would generally be treated as derivatives and fall under national measures restricting binary options.
• Tokenised contracts that are not financial instruments may instead fall under MiCA.
• Other products may be treated as bets and require permission under the gambling laws of individual member states.

Details worth keeping

ESMA stressed that not every yes-or-no contract meets that threshold. That applies whether the client is retail or professional. Retail access may face an additional barrier.