The European Securities and Markets Authority has issued a public statement reminding firms to assess whether event contracts, also marketed as prediction market products, fall within existing national product intervention measures on binary options. The statement makes clear that where an event contract qualifies as a financial instrument, it is a derivative and, because of its binary payoff structure, is likely to be caught by national measures that prohibit the marketing, distribution or sale of binary options to retail clients across the European Union. ESMA said the product label used by firms is irrelevant and that classification must depend on the contract's legal and economic features. Only event contracts linked to an underlying covered by Section C(4) to (10) of Annex I to the Markets in Financial Instruments Directive (MiFID II) qualify as financial instruments, but firms must conduct a careful legal analysis for these products and for other instruments with similar characteristics. A coupon or reward paid on the funds does not alter the product's binary nature. ESMA also reminded firms that distributing event contracts that are financial instruments requires authorisation under MiFID II even if the products are offered only to non-retail clients.
European Securities and Markets Authority2026-07-03
European Securities and Markets Authority warns event contracts may fall under binary options bans and require MiFID authorisation
The European Securities and Markets Authority said firms must assess whether event contracts qualify as financial instruments and therefore fall within national binary options bans for retail clients. It also reminded firms that distributing such products in the EU requires MiFID II authorisation, including where sales are limited to non-retail clients.