MFSA says prediction markets may trigger MiFID II, gambling and MiCA authorisations

The Malta Financial Services Authority (MFSA) issued its circular on 19 October 2026, setting out how operators should classify prediction-market activities and event contracts. It defines prediction markets as online platforms where users enter and trade event-based contracts, and event contracts as agreements with a binary financial outcome, fixed payout or no payout, depending on a yes-or-no answer to a future event. The questions can concern sports, politics, entertainment, financial instruments or weather.

The classification determines whether an operator needs authorisation under MiFID II, national gambling law, MiCA, or more than one framework. The MFSA expects operators to analyse both their activities and each individual contract, rather than rely on a commercial label such as “event contract” or “prediction market”.

Financial instruments face the strictest route

The circular cites ESMA’s July 2026 public statement that only event contracts whose question relates to an underlying listed in Section C(4) to (10) of Annex I to MiFID II qualify as financial instruments. Those contracts are derivatives and fall within national product intervention measures on binary options.

That means marketing, distribution or sale to retail clients is prohibited where an event contract meets the financial-instrument definition. MiFID II authorisation is also required for the provision of services and activities concerning those contracts, including where the platform serves only non-retail clients.

The MFSA’s earlier 2015 notice to Category 3 investment-services applicants drew a different boundary for non-financial events. It said that a bet or option on an event other than one of a financial-markets nature, such as a sporting win-or-loss outcome, would not be an instrument for the purposes of the Maltese Investment Services Act. The circular nevertheless stresses that the answer depends on the characteristics of the specific product.

The relevant binary-option analysis is functional. The contract must be:

- cash-settled, paying money rather than delivering an asset;
- limited to a fixed payout at expiry; and
- binary in outcome, paying a predetermined amount or zero if the underlying meets a specified condition.

A coupon or reward representing interest on funds does not change the contract’s binary nature, according to the circular’s account of ESMA’s position.

Gambling and MiCA remain possible

Prediction markets may also fall within national gambling legislation because of their similarity to betting and the range of possible underlying events. The compliance consequence is different from MiFID II. Gambling is not harmonised across the EU, so authorisation remains a matter for each Member State. There is no EU-wide gambling passport comparable to the single authorisation and passporting regime under MiFID II.

Tokenised event contracts that are not financial instruments may instead be crypto-assets under MiCA. A platform may therefore need MiCA authorisation where it provides a regulated crypto-asset service, such as custody or transfer of crypto-assets. MiCA does not regulate gaming services or financial instruments already within MiFID II and MiFIR.

The circular excludes prediction-market operators whose crypto-asset services are provided in a fully decentralised manner from MiCA altogether. That exclusion applies to the crypto-asset services described, not as a general exemption from any gambling or financial-services classification that may arise from the underlying activity.

The classification must be done contract by contract

The MFSA says a single platform may give users access to event contracts with different classifications. One service could therefore involve financial instruments, gambling products and non-financial-instrument crypto-assets at the same time, creating overlapping regulatory requirements.

In practice, operators should document the nature of the activity, the settlement mechanics, the underlying event, the client categories and any token or custody functionality for each product. They should then ensure they hold the authorisations required by the applicable framework and comply with its conduct rules.

The circular does not create a new single licence for prediction markets. It instead confirms that the existing perimeter rules apply despite the newer product terminology, with the MFSA expecting a thorough activity analysis and a case-by-case assessment of every event contract.