There is a plan that surfaces in almost every European conversation about event contracts, and it takes about an afternoon to arrive at. The permanent national measures mirroring the 2018 binary options prohibition are written against retail clients. Fine, the reasoning goes: we will not onboard retail clients in the Union. We will take professionals and institutions, keep the product exactly as it is, and the European problem goes away.
The plan is not stupid. It is half right, which is worse, because half right plans get built. Restricting distribution to non-retail clients really does step around the product intervention measures. It does nothing about the second requirement sitting behind them, and on 3 July 2026 the European Securities and Markets Authority put that second requirement under its own heading rather than in a footnote.
The ban and the licence come from two different instruments
These are not two readings of one rule. They are two rules with different legal bases and different boundaries, and the confusion between them is why the wholesale plan keeps getting drawn on whiteboards.
The prohibition is a product intervention measure. It began as a temporary EU wide decision that ESMA adopted on 1 June 2018 and applied from 2 July 2018, and it was replaced by permanent national measures once ESMA stopped renewing it in July 2019. You can read one of those national measures in full: the German supervisor BaFin issued a General Administrative Act under Article 42 of Regulation (EU) No 600/2014 which orders a prohibition of the marketing, distribution and sale of binary options to retail clients within the meaning of Article 4(1)(11) of Directive 2014/65/EU. Note where the sentence stops: at a defined client category.
The licence is something else entirely. It comes from Directive 2014/65/EU itself, from the rule that providing investment services or performing investment activities in relation to financial instruments in the Union is a regulated business that requires authorisation. That rule has no client category in it. It never did.
ESMA gave the wholesale question its own heading
The public statement ESMA published on 3 July 2026 is two pages long and carries reference ESMA35-243228190-8148. Its first half explains that only event contracts whose question relates to an underlying listed in Section C(4) to (10) of Annex I of MiFID II qualify as financial instruments, that those are derivatives, and that marketing, distributing or selling them to retail clients is therefore prohibited.
The second half has a heading of its own, and in a two page document that is a deliberate act of emphasis. The heading reads MiFID authorisation required for distribution to non-retail clients. Under it, ESMA reminds firms that providing investment services and activities concerning financial instruments in the Union requires authorisation under MiFID II irrespective of the category of clients served, and that distributing such event contracts even only to non-retail clients requires that authorisation. The regulator wrote the answer to the wholesale plan before anyone had publicly proposed it.
This was not an obscure release. ESMA announced it in a press release the same day, and national authorities relayed it, including the French AMF, which republished it on 3 July 2026. As of 10 September 2026 no supervisor has published anything qualifying it.
Authorisation attaches to the service, not to the person receiving it
It helps to see why the drafting works this way, because then you stop expecting an exception that was never there. Product intervention exists to protect a particular class of investor from a particular class of product, and it is proportionate precisely because it is narrow. Authorisation decides something else: who is allowed to run a financial services business at all, who holds client money, who has capital, governance, conduct rules and a supervisor with the power to walk in. A firm that runs an order book badly for professional counterparties damages the market as surely as one that runs it badly for retail.
The law firm Norton Rose Fulbright put the same point in inventory form in its May 2026 note on the EU approach to prediction markets and event contracts, written by Floortje Nagelkerke, Sebastien Praicheux and Simon Lovegrove: a platform whose contracts are MiFID II financial instruments faces the full suite of obligations, from authorisation and conduct of business rules through appropriateness and product governance to best execution. Dropping retail clients removes one item from that list, and appropriateness is the item it removes.
A professional client is a status somebody has to qualify for
The second thing the plan usually gets wrong is who a professional client actually is.
Under Annex II of MiFID II the category has two halves. Per se professionals are entities that are what they are by definition: firms authorised to operate in financial markets, large undertakings meeting size thresholds, national and regional governments, other institutional investors. Elective professionals are ordinary clients who ask to be treated as professionals and who have to pass an assessment before a firm may agree, covering their expertise, experience and knowledge, plus size and frequency tests on their actual trading. The client has to state the request in writing and the firm has to warn them what protections they are giving up.
That is not an onboarding checkbox and it cannot be applied at scale to a consumer funnel. A venue whose product design assumes self service signup has to decide what it will do with people who are plainly not professionals and who want in anyway. If the answer is a tick box saying the user considers themselves experienced, the venue has manufactured a compliance record that documents its own failure.
The two ways out of the ban do not fit a yes or no contract
There is a quieter version of the same plan: leave retail alone and reshape the instrument so that the prohibition does not catch it. The measures do have carve outs, and the BaFin act sets them out.
The first excludes a binary option where the lower of the two predetermined fixed amounts is at least equal to the total payment made by the client, including commissions, transaction fees and other related costs. In other words, a contract that cannot lose money. The second requires three conditions at once: a term from issuance to maturity of at least ninety calendar days, an approved prospectus available to the public, and a structure where the provider carries no market risk for the term and neither it nor any group entity makes a profit or loss on the contract beyond disclosed fees.
Hold a typical event contract against that. It settles at a fixed amount or at nothing, trades in cents between those poles, resolves many of its questions inside a week, and has no prospectus. Neither exclusion is reachable without destroying the product. And both are exclusions from the prohibition, so a firm that somehow qualified would have solved the retail question and still be standing in front of the licence.
An interest coupon does not make the contract something else
One paragraph of the ESMA statement is oddly specific, and it repays attention because it describes a real design rather than a hypothetical one.
ESMA notes that in some cases an investor may receive what the firm calls a coupon or a reward, representing the interest earned on the funds paid, and states that the existence of such a coupon or reward does not change the binary nature of the event contract itself. Nobody is named, and nobody needed to be, because the feature is public: when Interactive Brokers announced on 30 July 2025 that it was bringing Forecast Contracts to Europe, its own release described contracts settling at USD 1.00 or zero and trading between USD 0.02 and USD 0.99, paying an interest like incentive coupon on the market value of open positions, accruing daily and paid monthly at an annualised rate quoted that day as 3.83 percent.
The wider lesson sits just above that paragraph: the commercial name a firm gives a product is irrelevant to how it is categorised under MiFID II, and firms must run the legal analysis themselves, product by product, while observing the duty to act honestly, fairly and professionally in the best interests of clients. A footnote adds that taking part in circumvention activities is prohibited. Between those two sentences there is no room for a naming strategy.
A firm outside the Union gets no European route by staying wholesale
Suppose a venue accepts all of this and reaches for the obvious answer: we are a third country firm, we will serve European professionals from where we are.
There is a regime for that, and it is narrower than its reputation. Article 46 of MiFIR lets a third country firm provide investment services to eligible counterparties and professional clients without a branch, but only if it is entered in the register ESMA keeps, and ESMA may register it only after the European Commission has adopted an equivalence decision for that country under Article 47, alongside cooperation arrangements and home state supervision.
The gate has never opened. A 2024 study of the third country regime in the European Business Organization Law Review, published by Springer, records that the regime is not active because the Commission has taken no equivalence decisions, so market access for third country firms serving professional clients remains a national matter. We could find no Article 47 decision covering investment services for any jurisdiction as of 10 September 2026. The wholesale route therefore does not deliver one European answer. It delivers up to twenty seven national ones, and a firm that wanted to stop analysing jurisdictions has acquired more of them. That is the same shape of problem this site described when it wrote that there is no passport for a prediction market in Europe.
Reverse solicitation describes one trade and never a pipeline
The last exit on this road is the client who asked first. MiFID II does contain the idea, at Article 42: where a client established in the Union initiates the provision of a service at their own exclusive initiative, the third country firm requirement does not bite for that service, and the firm still may not market new categories of product to them on that footing.
ESMA has already dealt with the industrialised version. In its public statement of 13 January 2021, reference ESMA35-43-2509, it addressed firms inserting general clauses into terms of business and using online pop up boxes in which the client declares that every transaction is executed on their own initiative. The position is that where a firm solicits clients in the Union, or promotes or advertises its services there, the service is not provided at the client's exclusive initiative whatever the contractual wording says. A venue with a public website, a marketing budget and an app store listing is soliciting. Reverse solicitation can describe a genuine inbound trade, never a business model, and a disclaimer does not convert one into the other.
The gambling regulator never asked how you categorise clients
Everything above sits inside financial regulation. There is a second European authority for the same product, and it does not read Annex II.
National gambling law is a national competence, its tests are about who can reach the offer and what the offer looks like, and MiFID client categorisation is not an input to them. The point has a demonstration attached: on 26 May 2026 the Spanish ministry responsible for consumer affairs opened sanctioning proceedings and provisionally ordered the blocking of Polymarket and Kalshi. Kalshi is a US exchange designated and supervised at federal level, and that status was not a defence in Madrid because it was not part of the question being asked.
So the honest count of European obstacles for a yes or no contract is three, not one. Whether the contract is a financial instrument, which decides the licence and the retail ban together. Whether it is a bet under the national law of each country reached. And, for a tokenised version that is not a financial instrument, whether it lands in the crypto asset rulebook instead, which is the third box we looked at through the MiCA route. The boxes do not cancel each other. That is stated in the first footnote of the same ESMA statement, and it is why the British split by underlying is worth reading next to the European one.
Before a venue tells anyone it serves professionals only
None of this is an argument against the wholesale strategy. It is an argument against announcing it before the work behind it exists. Six things should be written down and dated first.
- A per contract classification saying, for every line in the book, whether the event question relates to an underlying in Section C(4) to (10) and who signed that conclusion.
- The authorisation position: which entity holds a MiFID II licence, in which member state, for which services, or which national third country regime is relied on in each country.
- The client categorisation procedure, including the assessment for elective professionals, the written request, the warning given and the evidence retained for each one.
- A rejection path for users who do not qualify, tested by someone trying to get through it, because a control nobody has attacked is a control nobody has tested.
- A marketing perimeter map answering, country by country, whether anything the firm publishes reaches consumers there, since that is the fact ESMA reads before any disclaimer.
- The gambling analysis, separately, for every country the product can be opened from.
A firm that has these six documents can say professionals only and mean it. A firm that has a slide saying professionals only has a marketing position, and the difference will be discovered by a supervisor rather than declared by the firm.
The audience you pick does not pick your obligations
The reason this matters beyond compliance housekeeping is that the wholesale plan is a way of not answering a question. Directive 05 of our manifest asks operators to set standards against the jurisdiction that regulates next rather than the one that has not yet, and narrowing the audience is the most comfortable available way of postponing that. It looks like a decision. It defers one.
The European position as of 10 September 2026 is unusually legible. If the contract is a financial instrument, a licence is required whatever the client category and retail is closed. If it is not, national gambling law is waiting and it decides by access rather than by sophistication. If it is a token outside both, a third rulebook applies. No configuration of client types leaves a firm outside all three, and the useful consequence is that the analysis can be done now, on paper, without waiting for anyone to rule on anything.
Firms that want to help write the standard this category will end up living under can read the commitment and sign it.