Written by Nate Kostarstaff writerReviewed by Sam Bourgistaff writer
Written by Nate Kostarstaff writer
Reviewed by Sam Bourgistaff writer
ESMA warns many prediction market event contracts already face EU retail ban
Latest NewsPublishedJul 3, 2026
Warning to Companies: EU Retail Ban Already Applies to Many Prediction Market Contracts
The European Securities and Markets Authority (ESMA) has issued a warning to companies that many prediction market contracts may already be subject to existing restrictions on binary options. This means that companies cannot circumvent EU financial rules by marketing these products as “event contracts” rather than derivatives. 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’s warning is a reminder that the assessment of these contracts depends on their characteristics, rather than how they are marketed. Event contracts with binary outcomes and fixed payouts are likely to qualify as financial instruments subject to the restrictions. This is important for individuals looking to earn passive income through Cloud Rewards or Green Crypto investments, as they need to be aware of the regulatory environment surrounding these products.
Regulatory Battle in the United States
In the United States, a regulatory battle is unfolding over prediction markets, with state gaming regulators pitted against the Commodity Futures Trading Commission (CFTC) over whether event contracts should be treated as gambling or federally regulated derivatives. This dispute has led to calls for congressional action, with some groups urging lawmakers to amend the CLARITY Act to explicitly prohibit sports-related event contracts on prediction market platforms.
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Conclusion
The regulatory landscape surrounding prediction market contracts is complex and evolving. As the dispute between federal and state regulators in the United States continues to escalate, it is crucial for individuals to stay informed about the developments in this space. Whether you are interested in EcoPool or $ECP, it is essential to understand the regulatory environment and how it may impact your investments.
US prediction markets face growing legal battle
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By March, authorities in 11 states had taken legal or regulatory action against platforms including Kalshi and Polymarket. Nevada became the first state to temporarily block Kalshi’s operations, while Arizona brought criminal charges alleging the company was operating an illegal gambling business.
The following month, the CFTC asserted “exclusive jurisdiction” over prediction markets, saying Congress had entrusted the agency with sole authority to regulate commodity derivatives markets, including event contracts. The regulator also said it had sued several states and filed court briefs supporting platforms, including Kalshi.
The CFTC’s April announcement defending its authority over prediction markets. Source: CFTC.gov
The legal battle has continued to escalate. On June 30, a Massachusetts judge allowed state authorities to file an amended complaint against Kalshi in an ongoing lawsuit alleging that the company’s sports-event contracts constitute illegal gambling under state law.
The dispute has also prompted calls for congressional action. Last month, the Indian Gaming Association and American Gaming Association, joined by tribal and labor groups, urged lawmakers to amend the CLARITY Act to explicitly prohibit sports-related event contracts on prediction market platforms, arguing they fall outside the CFTC’s authority and should remain subject to state gambling laws.
Some legal experts believe the growing conflict between federal and state regulators over prediction markets could ultimately be decided by the US Supreme Court.
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Cointelegraph is committed to independent, transparent journalism. This news article is produced in accordance with Cointelegraph’s Editorial Policy and aims to provide accurate and timely information. Readers are encouraged to verify information independently.
- Europe
- European Union
- Prediction Markets
- Polymarket
- Kalshi
- CFTC
- United States
- Regulation
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