ESMA Warns Prediction Market Contracts on Polymarket, Kalshi May Require MiFID II Authorization

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According to ESMA, on July 3, the European Securities and Markets Authority warned that prediction market contracts offered on platforms such as Polymarket and Kalshi may fall under MiFID II (Markets in Financial Instruments Directive II) oversight as they could resemble binary options. ESMA stated that event contracts qualifying as financial instruments are derivatives subject to temporary product intervention measures on binary options and must comply with market protections established by National Competent Authorities in each EU jurisdiction. The regulator emphasized that contract labels are irrelevant; firms must conduct thorough case-by-case analysis of products and obtain authorization for distribution, even if limited to non-retail customers.
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