ESMA Signals Strict Approach to Event Contracts

In its 3 July statement, ESMA warned that event contracts may fall within the EU’s long-standing retail ban on binary options. The regulator addressed a market that barely exists in Europe and raised the bar for any future launch.

The prediction market boom has so far been a US story. Kalshi and Crypto.com operate under CFTC oversight, Polymarket serves its global audience from offshore, and none of the major platforms runs a licensed European operation.

Any firm considering a European launch must first answer a more basic question: how would its contracts be classified under EU law?

Regulators Acted Before the Market Arrived

European regulators have so far targeted platforms that reach local users without holding local licences. On 26 May, Spain's Ministry of Consumer Affairs temporarily blocked Kalshi and Polymarket for operating without a gambling licence.

On 19 June, gambling regulators from nine European countries issued a joint statement against unlicensed prediction market platforms targeting the region. The signatories, including Belgium, France, Germany and Spain, cited consumer protection and integrity risks around the FIFA World Cup and urged sports bodies to check operators’ legal status before signing partnerships.

On 3 July, ESMA said that existing national product intervention measures on binary options apply to event contracts that qualify as financial instruments.

Until this month, the operative question was gambling licensing. National regulators in Belgium, France, and elsewhere had treated event contracts as unlicensed betting products.

ESMA's statement adds another question: whether the product qualifies as a financial instrument under MiFID II. The regulator did not answer it with a new ban.

Instead, it tied the consequences to the classification itself: where an event contract does qualify, existing national restrictions on binary options may apply to that contract. Legal commentators had flagged this classification gap months before ESMA stepped in.

Four Routes In, None of Them Tested

Four business models could, in principle, bring prediction products to Europe. None currently does so in licensed form, and after ESMA each faces its own classification question first.

The fourth row reflects the current state of the market. None of the major MiCA-licensed exchanges has publicly announced plans to offer prediction products in Europe.

Crypto.com, often cited alongside Kalshi and Polymarket, runs its prediction offering through Crypto.com Derivatives North America, a CFTC-regulated exchange serving US clients.

ESMA’s statement means a firm considering a European launch now faces a contract-by-contract legal assessment before it can determine which licence, if any, to apply for.

The Classification Question Comes First

In March, before ESMA's statement, lawyer Terence Cassar argued on the Oxford Business Law Blog that the core problem for the European market was the absence of a clear classification for prediction contracts.

He outlined three possible outcomes: a contract may qualify as a MiFID II derivative, in some cases a binary option; it may be prohibited outright on public policy grounds; or, falling outside MiFID II, it may default to national gambling frameworks.

He proposed a structured "Prediction Test", modelled on Malta's Financial Instrument Test for crypto-assets, to guide classification by exclusion.

The legal uncertainty identified by commentators is now beginning to receive regulatory clarification. ESMA's statement establishes that, for at least part of the event contract universe, the analysis starts with MiFID II.

ESMA has clarified one part of the European puzzle, without creating a clear route to market. Any firm considering a launch must now start with contract classification, before licensing, distribution or product design.