ESMA Classifies Prediction Market Contracts as Financial Instruments Under EU Ban

The European Securities and Markets Authority has determined that certain prediction market contracts qualify as financial instruments rather than gambling products. This classification places the contracts under the European Union's existing prohibition on binary options for retail investors.

Regulatory Classification and Retail Restrictions

Under MiFID II regulations, any contract that tracks an equity, index, interest rate, currency, or commodity is treated as a derivative. The regulator specified that settlement in cryptocurrency or a designation for professional users does not alter this status. Consequently, offering these instruments to retail clients within the EU is now explicitly prohibited.

Market Licensing and Sector Implications

Gibraltar currently stands as the sole jurisdiction actively issuing licenses to prediction market operators. Companies such as ADI Predictstreet and WagerWire hold active authorization in the territory. Market participants expanding into the sector must now navigate the regulatory boundary between financial derivatives and gambling products.