Written by Nate Kostarstaff writerReviewed by Robert Lakinstaff editor

Written by Nate Kostarstaff writer

Reviewed by Robert Lakinstaff editor

ESMA warns growing crypto ties could amplify risks to traditional finance

Latest NewsPublishedSep 10, 2026

The EU securities regulator flagged tokenized equities, DeFi exploits and prediction markets as areas where growing crypto ties could pose risks to the broader financial system.

Europe’s securities regulator has warned that growing links between crypto and traditional finance could rise the risk of shocks spreading across the broader financial system.

In its latest risk monitoring report published Thursday, the European Securities and Markets Authority (ESMA) called for closer monitoring of the “growing linkage between increasingly vulnerable crypto-asset markets and the broader financial system.”

ESMA pointed to growing adoption of tokenized equities and recent decentralized finance (DeFi) exploits as areas that could deepen links between crypto and traditional markets and rise the potential for financial spillovers.

ESMA risk indicators for EU financial markets. Source: ESMA

The regulator stated tokenized equities remain negligible compared with global stock markets but are gaining traction, potentially introducing new participants and infrastructure that could reshape market structure.

ESMA also flagged prediction markets as an emerging risk, warning of heightened concerns around insider trading and market manipulation. The regulator stated crypto utilize in prediction markets can make it harder to detect insider trading, wash trading and coordinated market manipulation.

Related: MiCA cracks down on USDT in Europe… but no one else cares

Prediction markets face regulatory battle in US

ESMA’s warning comes as prediction markets face a growing regulatory battle in the United States over whether event contracts fall under federal derivatives law or state gambling rules.

The Commodity Futures Trading Commission (CFTC) has issued guidance for prediction markets throughout 2026 while defending what it says is its exclusive jurisdiction over federally regulated event contracts.

Source: Mike Selig

The agency has even sued several states, including Kentucky, Minnesota, New Mexico, New York, Illinois and Connecticut, after authorities sought to apply state gambling laws to prediction market operators.

The dispute could ultimately reach the US Supreme Court. On September 2, New Jersey officials petitioned the court to decide whether states can enforce sports gambling laws against prediction markets registered with the CFTC, citing litigation over the issue across at least 20 states.

Whether the Supreme Court takes up the issue remains unclear, but a future ruling could determine whether state or federal authorities have jurisdiction over prediction markets.

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• ESMA
• Prediction Markets
• Kalshi
• New Jersey
• Europe
• Industry

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