The European Securities and Markets Authority (ESMA) has warned prediction market operators to assess whether this fast-growing product category, also known as event contracts, falls under existing EU restrictions on binary options.
The reminder comes as prediction markets continue to gain traction worldwide, attracting increasing numbers of participants and raising questions about where financial products end and gambling begins.
Event contracts are products whose financial outcome is binary (a fixed payout or no payout at all) and depends on a yes-or-no answer to a question about a future event. Whether event contracts qualify as financial instruments depends on the event-related question they address. Event contracts might also be classified as bets under national gambling laws.
When event contracts are considered financial instruments, they are categorised as derivatives. Because they have binary outcomes, these products are subject to existing national product intervention measures for binary options, enforced by relevant national authorities that restrict their marketing, distribution and sale.
ESMA also reminded firms that any company distributing event contracts classified as financial instruments within the EU must be authorised as an investment firm, even if the products are offered only to professional investors.
At a recent iGB LIVE 2026 panel titled “Prediction Markets: Digital Engagement or Gambling Without Safeguards?” speakers warned that presenting prediction markets as trading or investment products may lead consumers to underestimate the gambling-like risks involved.
Melanie Ellis, a partner at Northridge Law, noted that if prediction markets gain traction in Europe, gambling regulators may need to develop new enforcement tools, particularly in relation to insider trading risks.
In June, ADI PredictStreet was awarded the first prediction market license granted in Gibraltar
