ESMA warns many prediction market event contracts already face EU retail ban

The European regulator said companies cannot circumvent EU financial rules by marketing binary-style products as event contracts rather than derivatives.

The European Securities and Markets Authority (ESMA) has warned that many prediction market contracts may already fall under existing restrictions on binary options, saying companies cannot avoid financial regulations simply by marketing them as "event contracts."

In a public statement on Friday, the regulator reminded companies that event contracts meeting the definition of financial instruments are already prohibited from being marketed, distributed or sold to retail investors under national measures implementing ESMA's 2018 binary options restrictions.

ESMA said the assessment depends on a contract's characteristics rather than how it is marketed, adding that event contracts with binary outcomes and fixed payouts are likely to qualify as financial instruments subject to the restrictions.

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