The European Securities and Markets Authority (ESMA) said some prediction-market contracts may be covered by the European Union\u2019s binary options ban, warning firms that yes-or-no event contracts cannot be marketed, distributed or sold to retail clients when they qualify as financial instruments.<\/p>\n
\u201cThis means that the marketing, distribution or sale to retail clients of event contracts that meet the definition of financial instruments is prohibited,\u201d ESMA said in a statement.<\/p>\n
The regulator targeted contracts whose payout is binary, usually a fixed amount or nothing, and depends on the outcome of a future event.<\/p>\n
ESMA said the product label is irrelevant, as a contract sold as an \u201cevent contract\u201d can still be a MiFID II financial instrument if its underlying falls within the derivatives categories.<\/p>\n
Event contracts that qualify as financial instruments are derivatives, ESMA said. That puts them within the scope of national product intervention measures for binary options.<\/p>\n