Application of National Product Intervention Measures on Binary Options to Event Contracts

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Triq l-Imdina, Zone 1 Central Business District, Birkirkara CBD 1010 +356 2144 1155 communications@mfsa.mt www.mfsa.mt ESMA Issues Public Statement on the Application of National Product Intervention Measures on Binary Options to Event Contracts Background The European Securities and Markets Authority (ESMA) has published a Public Statement as of 3 July, addressing the rapid growth of prediction markets and the increasing offerings of “event contracts”. The term contracts refer to agreements whose financial outcome fully depends on the occurrence or non-occurrence of a specified future event, providing either a fixed payout or no payout. Not all event contracts qualify as financial instruments, however only event contracts with an event question related to an underlying asset mentioned in Section C(4) to (10) of Annex I of MiFID II classify as derivatives, therefore being financial instruments. In such circumstances, the product falls within the scope of the temporary product intervention measures on binary options which were initially adopted by ESMA Decision (EU) 2018/795, and which were subsequently replaced by permanent national product intervention measures mirroring the ESMA temporary measures. Nevertheless, this public statement serves as a reminder to investment firms to assess whether the national product intervention measures apply to the products they offer, considering the specific characteristics of those products. Such an assessment should be carried out for all financial instruments that share characteristics similar to those of event contracts, to determine whether the national product intervention measures are applicable. Scope ESMA specifies that the commercial name provided by firms (e.g. “event contracts”) is irrelevant for the categorisation under MiFID II of products distributed, marketed or offered to clients, and firms must conduct a careful legal analysis of these products and their functions to check whether they fall within the scope of application of product intervention measures. Investment Firms must conduct this careful legal analysis by always adhering to the overarching obligation to act honestly, fairly and professionally in accordance with the best interests of clients. In particular, ESMA recalls that products with the following characteristics are likely to be considered binary options:
3 August 2026