We wish to inform you of recent regulatory developments regarding prediction markets and their treatment under the EU financial services regulatory framework, especially the increasing scrutiny these products are receiving across the European Union.

Prediction Markets

Prediction markets are platforms that allow participants to trade contracts whose value depends on the outcome of a future event, such as political elections, sporting results, macroeconomic indicators, interest rate decisions, stock market movements, or other real-world events. These markets have experienced significant growth globally, particularly in the United States.

Unlike the United States, the European Union has not introduced a dedicated regulatory framework for prediction markets. Instead, the regulatory analysis is conducted under existing legislation, primarily the MiFID II, MiCA, and, where applicable, national gambling laws.

Prediction Market Products as Financial Instruments

The current position under EU law is that prediction markets are not expressly regulated as a separate category of financial products. The key legal question is whether a particular prediction market product constitutes a financial instrument under MiFID II, particularly where the prediction market product is structured as a derivative referencing financial variables such as interest rates, currencies, commodities, financial indices or similar underlying.

The assessment is fact-specific and depends on the legal and economic characteristics of each product rather than its commercial description.

The strongest argument for MiFID II classification arises where:

• the contract provides a binary or fixed payout based on the occurrence of a future event; and
• the outcome relates to a financial underlying, such as an interest rate, currency, commodity, inflation measure, financial index or other financial variable.

In previous guidance concerning binary options, the European Commission confirmed that cash-settled binary products may constitute derivative financial instruments. ESMA has similarly characterised binary options as cash-settled derivatives whose payoff depends on whether specified events occur.

ESMA’s recent clarifications

On 3 July 2026, ESMA published a Public Statement clarifying that certain prediction market products may qualify as financial instruments and, where they exhibit the characteristics of binary options, may also fall within the scope of existing national product intervention measures restricting their distribution to retail clients.

In accordance with the said Public Statement:

• Event contracts are agreements whose financial outcome is binary (a fixed payout or no payout at all) and depends on a yes-or-no answer to a question about a future event. 
• Not all event contracts are financial instruments. Only event contracts with an event question related to an underlying mentioned in Section C(4) to (10) of Annex I of MiFID II classify as financial instruments.
• Event contracts qualifying as financial instruments are derivatives and fall within the scope of the temporary product intervention measures on binary options which were initially adopted by ESMA Decision (EU) 2018/7952 and which were subsequently replaced by permanent national product intervention measures mirroring the ESMA temporary measures.
• This means that the marketing, distribution or sale to retail clients of event contracts that meet the definition of financial instruments is prohibited.

ESMA highlighted that firms must assess whether these products qualify as financial instruments and whether they fall within existing product intervention measures relating to binary options.

Although the statement does not introduce new legislation, it reinforces the application of the existing MiFID II/MiFIR framework and signals increased regulatory scrutiny across the EU.

Overall European regulatory trend

In July 2026, France’s gambling regulator (“ANJ”) ordered access restrictions against Polymarket, one of the main prediction markets’ platforms in the US, citing concerns that the platform was offering unauthorized gambling products to French users. Various other European jurisdictions have similarly restricted or challenged prediction market operators.

The overall European regulatory trend appears to be moving towards greater scrutiny and enforcement, rather than the creation of a bespoke framework for prediction markets. Although prediction markets are not regulated as a standalone product category in the EU, firms should not assume they fall outside the regulatory perimeter.

Before offering or facilitating access to such products, firms should undertake a documented legal and regulatory assessment to determine whether MiFID II, MiFIR, MiCA and/or national gambling legislation may apply.

Implications for CIFs

Where a prediction market product is classified as a financial instrument, firms may be subject to the full MiFID II regime, including licensing, conduct of business, product governance, investor protection and other regulatory obligations.

Furthermore, ESMA’s long-standing product intervention measures on binary options remain particularly relevant. As aforementioned, where a prediction market contract is classified as a binary option, retail distribution may be prohibited.

Products that fall outside MiFID II may still be subject to MiCA or applicable national gambling legislation, depending on their structure and the jurisdiction in which they are offered.

Recent developments demonstrate an increasingly active enforcement environment. For CIFs, these developments are particularly relevant given CySEC’s continued alignment with ESMA’s supervisory approach.

For further information or assistance, please do not hesitate to contact us.

We would like to inform you regarding the publication of Cyprus Securities and Exchange Commission (CySEC), regarding the new Sanction Application Form for Authorisation Involving Sanctioned Individuals or Entities.

The new process introduces a standardised application form used to request authorisation for transactions or activities involving individuals or entities subject to EU sanctions.

The application may be used to request permission to carry out a transaction, continue a business relationship, or access frozen funds or economic resources exceeding €100,000, where permitted under applicable sanctions regulations and subject to an applicable derogation –  https://www.cylaw.org/nomoi/arith/2025_1_150.pdf.

For purposes of fund unfreezing requests, applications may be submitted by:

• economic operators established in the Republic of Cyprus or having a branch in the Republic of Cyprus, provided that the request relates to accounts maintained with a credit institution within the Republic of Cyprus; and
• service providers representing natural or legal persons subject to sanctions, where the requests relate to accounts held outside the Republic of Cyprus for the purpose of executing payments within or outside the Republic of Cyprus.

The purpose of the new process is to ensure that all requests are submitted in a uniform manner to the National Sanctions Implementation Unit under the Ministry of Finance.

From 31 October 2025, all applications will be submitted electronically via the designated online form available at the following link: https://forms.office.com/e/fmiBbTfZ55.

For a short transitional period, applications may still be submitted via email using the existing forms. This transitional arrangement will remain in place until 31 December 2025, after which email submissions will no longer be accepted.

For further information or assistance, please do not hesitate to contact us.

We would like to inform you regarding the publication of Circular C756 issued by the Cyprus Securities and Exchange Commission (CySEC), regarding the dual licensing framework applicable to Crypto-Asset Service Providers (“CASPs”) under the regulatory regime of Directive (EU) 2015/2366 on payment services in the internal market (PSD2).

CySEC draws attention to the regulatory considerations applicable to CASPs that may also fall within the scope of PSD2 when providing payment services alongside crypto-asset services.

In this context, CASPs are reminded that certain activities may trigger additional authorisation requirements under PSD2 where services provided qualify as payment services as defined under the relevant EU framework.

CySEC notes that entities operating as CASPs should assess whether their business model involves:

• the execution of payment transactions;
• the issuance or acquisition of payment instruments; or
• the provision of services that fall within the scope of PSD2.

Where such activities are identified, firms may be required to obtain additional authorisation or operate under a dual licensing structure, as applicable.

CySEC further expects Regulated Entities to ensure that:

• appropriate regulatory analysis is performed to determine applicable licensing requirements;
• potential overlaps between CASP authorisation and PSD2 requirements are properly assessed; and
• compliance frameworks are updated accordingly where dual regulatory obligations arise.

For further information or assistance, please do not hesitate to contact us.

With reference to the above-mentioned subject, we would like to bring to your attention the recent publication by the Cyprus Securities and Exchange Commission (CySEC) regarding the enactment of Law 12(I)/2026 (“Law”), which establishes the procedures for reporting actual or potential infringements of the Market Abuse Regulation (EU) No 596/2014 (“Market Abuse Regulation”, “MAR”) to CySEC.

The purpose of this Law is to implement a structured framework for the submission, receipt and handling of reports relating to suspected market abuse violations, including insider dealing, unlawful disclosure of inside information and market manipulation. In this respect, CySEC has established dedicated and secure communication channels to facilitate the reporting process and ensure the confidentiality and protection of the reporting persons.

The introduction of this Law aims to enhance transparency and strengthen the mechanisms available for reporting potential infringements of the Market Abuse Regulation directly to CySEC.

Part A – Overview of the Law

This new Law outlines the procedures for the reporting of actual or potential infringements of the MAR to the CySEC. In particular, the Law sets out:

• the establishment of secure and dedicated communication channels for reporting suspected infringements;
• the procedures for submission, receipt and handling of reports by CySEC;
• the appointment of specially trained CySEC personnel responsible for receiving and assessing such reports;
• the safeguards ensuring confidentiality and protection of the identity of reporting persons;
• the requirements for record keeping and documentation of reports received;
• the procedures for the processing and protection of personal data collected during the reporting process.

 

Part B –Key Provisions

1. Reporting Channels -pending to be announced

Reports of actual or potential infringements may be submitted, even anonymously, through the following channels:

• written reports (including electronic submissions);
• oral reports via telephone lines, with or without recording;
• personal meetings with designated CySEC personnel; or
• other means than the specific channels referred above, (in this case it shall be forwarded immediately, without modification, to the specialized members of the CySEC’s staff using the dedicated communication channels)

 

1. Handling of Reports

• CySEC is required to ensure that all reports are handled through secure systems that guarantee the confidentiality and integrity of the information received.
• CySEC may require the reporting person to clarify the information disclosed or to provide additional information available to them;
• CySEC is required to set the type, content and timeframe of the response after submitting the report;
• Specially designated and trained staff members are responsible for receiving, following up and communicating with reporting persons where necessary.

Protection of Reporting Persons

• Appropriate safeguards are provided to protect individuals who report infringements or are accused of infringements, against retaliation, discrimination or other types of unfair treatment at a minimum.

Data Protection and Record Keeping

• CySEC must maintain records of only Market Abuse related data received and ensure that personal data collected is processed in accordance with applicable data protection legislation.
• The personal data collected in the context of receiving reports of infringements shall be deleted within three (3) months from the date of completion of the procedure. However, in the event that judicial or disciplinary proceedings have been initiated against the reported person or the reporting person, the personal data shall be retained for the duration of such proceedings, until their full completion.

For further information or assistance, please do not hesitate to contact us.

We would like to inform you regarding the publication of Circular C762 issued by the Cyprus Securities and Exchange Commission (CySEC) concerning the Financial Action Task Force (FATF) report titled “Targeted Report on Stablecoins and Unhosted Wallets” (the “Report”).

CySEC draws attention to the FATF Report and reminds Regulated Entities that, in line with the FATF 2021 Updated Guidance on a Risk-Based Approach for Virtual Asset Service Providers (VASPs), they are expected to adequately identify, assess, and mitigate risks associated with the use of stablecoins and unhosted wallets.

CySEC further highlights the relevance of Regulation (EU) 2023/1113 on Transfer of Funds (TFR), as previously communicated to Regulated Entities via Circular C675.

 Regulated Entities are expected to:

• take into account the FATF Report and consider the money laundering and terrorist financing risks associated with stablecoins and unhosted wallets;
• enhance their understanding of the risks arising from transfers involving such instruments; and
• apply a risk-based approach in line with the Prevention and Suppression of Money Laundering Activities Law (L.188(I)/2007), as amended.

Regulated Entities should ensure that their AML/CFT frameworks appropriately reflect the risks associated with:

• stablecoin transactions; and
• transfers involving unhosted wallets.

For further information or assistance, please do not hesitate to contact us.

We would like to inform you regarding the recent publications issued by the European Securities and Markets Authority (European Securities and Markets Authority) concerning updates under the Markets in Financial Instruments Directive II (MiFID II) and Markets in Financial Instruments Regulation (MiFIR).

 

ESMA Decision on Market Data Obligations (23 February 2026)

On 23 February 2026, ESMA published a decision adopted by its Board of Supervisors to withdraw its guidelines on market data obligations under MiFID II and MiFIR.

This decision forms part of ESMA’s ongoing review of the regulatory framework applicable to market data practices within EU financial markets.

ESMA 2026 Transparency Calculations (3 March 2026)

On 3 March 2026, ESMA published its annual transparency calculations for equity and equity-like instruments, applicable from April 2026.

These calculations are issued under MiFID II and determine key parameters used for:

• pre-trade transparency waivers; and
• deferred publication of post-trade transaction data.

The 2026 updates include revisions to thresholds such as:

• large in scale (LIS) thresholds; and
• size specific to the instrument (SSTI) thresholds.

These parameters are used to determine when transactions may be exempt from certain transparency requirements or subject to deferred reporting.

Implementation Timeline

The updated transparency parameters will apply from April 2026. Market participants are expected to ensure that their systems, reporting processes, and data controls are aligned in advance of the implementation date.

Operational Considerations

Firms may need to review their internal arrangements, including:

• transaction reporting processes;
• instrument classification and data validation;
• application of transparency waivers; and
• related compliance and control frameworks.

For further information or assistance, please do not hesitate to contact us.

We would like to inform you regarding the publication of Circular C774 and relevant Announcement issued by the Cyprus Securities and Exchange Commission (CySEC), regarding the two AML Authority (AMLA) public hearings, as follows:

1. Draft Regulatory Technical Standards (the ‘RTS’) under articles 16(4) and 17(3) of AMLR – on group wide minimum requirements and additional measures for subsidiaries and branches in third countries.

• The deadline for the submission of comments is 15 June 2026.
• Online Public Hearing on the draft GLs is scheduled for 20 May 2026. –link

 

1. Draft Guidelines (the ‘GLs’) under article 10(4) of Regulation (EU) 2026/1624 (the ‘AMLR’) – on business-wide risk assessment

• The deadline for the submission of comments is 15 July 2026
• Online Public Hearing on the draft GLs is scheduled for 28 May 2026– link

CySEC recommends to the Regulated Entities to attend the Public Hearing.

For further information or assistance, please do not hesitate to contact us.

We would like to inform you regarding the publication of Circular C778 issued by the Cyprus Securities and Exchange Commission (CySEC), regarding the AML Authority (AMLA) public hearing on the draft Regulatory Technical Standards (RTS) under Article 46(4) of Directive (EU) 2024/1640.

In accordance with the above Circular, CySEC informs that a public webinar will be held in relation to the AMLA consultation on the draft RTS. The draft RTS address supervisors of groups of obliged entities operating across borders in the financial and non-financial sectors, and form part of a broader cooperation framework that also includes AML/CFT supervisory colleges and cooperation guidelines.

• Online Public Hearing is scheduled for 28 May 2026. –link
• AMLA welcomes participation from all interested stakeholders and invites comments on the specific questions in section 5.2 of the consultation paper

CySEC recommends to the Regulated Entities to attend the Public Hearing.

For further information or assistance, please do not hesitate to contact us.

With reference to the above-mentioned subject, we would like to note that according to the CySEC Circular C758, the European Securities and Markets Authority (“ESMA”) has launched a Common Supervisory Action for2026 (“CSA 2026”) with national competent authorities (“NCAs”) on the conflicts of interest in the distribution of financial instruments.

The goal of the CSA 2026 will be to assess how firms comply with their obligations under MiFID II to identify, prevent, and manage conflicts of interest when offering investment products to retail clients and will focus on:

• The possible impact of staff remuneration and inducements on what products are offered to investors.
• The role of digital platforms in directing investors towards certain products, and whether this serves their best interests.
• The ways firms manage potential conflicts between their own profits and the needs of retail investors.

 

For the purposes of the CSA 2026, CySEC will consider the following regulatory framework:

2017. Articles 10(1)(c)(iii), 17(2), 17(3), 24 and 25 of the Law 87(I)/2017.
2018. Articles 22, 23, 24, 27, 33, 34 and 35 of the Commission Delegated Regulation (EU) 2017/565.
2019. Articles 11(3) and 13 of the CySEC Directive DI87-01.
2020. ESMA Guidelines on certain aspects of the MiFID II remuneration requirements.

Therefore, CySEC expects CIFs to adhere to the content of this Circular as it will form part of CySEC’s supervisory review for the purposes of the CSA 2026.

For further information or assistance, please do not hesitate to contact us.