Malta's regulator explains how prediction markets may fall under MiFID II, gambling law or MiCA

On 19 October the Malta Financial Services Authority (MFSA) published a circular on how prediction-market operators should classify their activities and contracts. Its central point is that the answer depends on each contract.

“Some - but not all - event contracts are financial instruments,” the regulator said. Depending on the analysis, a contract may instead be a bet under national gambling law or, if it is tokenised and not a financial instrument, a crypto-asset under MiCA.

Three possible regimes

The circular sets out three routes to authorisation.

MiFID II

The MFSA relies on ESMA’s public statement of 3 July 2026, which said that only event contracts whose question relates to an underlying listed in Section C(4) to (10) of Annex I of MiFID II are financial instruments. Those that qualify “are derivatives”. They therefore fall within the national product intervention measures that replaced ESMA’s 2018 temporary ban on binary options for retail clients, so their marketing, distribution or sale to retail clients “is prohibited”.

ESMA’s statement also said that offering such contracts even only to non-retail clients requires MiFID II authorisation.

The MFSA notes that its own July 2015 notice to Category 3 licence applicants had already said that a bet on a non-financial event, such as a win or loss in a sporting event, “shall not be considered an instrument” for the purposes of Malta’s investment services law.

Gambling

Prediction markets “could also conceptually be captured under gambling laws”. The MFSA warns of a key limit: there is no harmonised EU gambling framework. Unlike MiFID II, a gaming licence carries no single authorisation or passport, and gambling regulation is “largely a matter of national law”.

MiCA

Operators using blockchain infrastructure may need MiCA authorisation if they provide a regulated service such as custody or transfer of crypto-assets. Operators whose crypto-asset services are “provided in a fully decentralised manner” would fall outside MiCA entirely, the circular says.

The binary-option overlap

The MFSA repeats ESMA’s warning that a product’s commercial name is “irrelevant” to its MiFID classification. It also repeats that event contracts with a binary outcome and payout are “likely to be derivatives that are financial instruments”, and therefore likely to be caught by the retail product intervention measures.

ESMA had added that paying a “coupon” or “reward” representing interest on customer funds “does not change the binary nature of the event contract itself”.

The circular closes by noting that one platform may list contracts with different classifications, “which could trigger the application of multiple regulatory frameworks simultaneously”.

Why it matters

For operators considering European expansion, Malta is a natural starting point because of its experience in gaming and crypto licensing. The circular removes any assumption that a Maltese gaming licence would cover a full event-contract book.

In practice, a platform listing sports and election contracts next to contracts on interest rates, inflation or share indices would need to split its offering. The financial-instrument contracts would sit under MiFID II and be closed to EU retail clients.

Compliance teams will need to classify each contract and keep records of that analysis. Distributors should note the warning about interest-bearing “rewards”.

Sources

• MFSA, Circular “Prediction Markets and Event Contracts”, 19 October 2026 — https://www.mfsa.mt/wp-content/uploads/2026/10/Prediction-Markets-and-Event-Contracts.pdf
• ESMA, Public Statement ESMA35-243228190-8148, 3 July 2026 — https://www.esma.europa.eu/sites/default/files/2026-07/ESMA35-243228190-8148_Public_Statement_on_the_application_of_the_national_product_intervention_measures_on_binary_options_to_event_contracts.pdf