EU regulator warns that some prediction‑market contracts may breach the EU binary options ban, requiring compliance with MiFID II and possible gambling or MiCA rules. The European Securities and Markets Authority said a contract’s actual function as a derivative matters more than its commercial name when assessing compliance. Firms offering investment services linked to these products must obtain MiFID II authorization and may also be subject to national gambling regulations or the MiCA framework for tokenized contracts. ESMA emphasized that marketing, distribution, or sale of binary event contracts that qualify as financial instruments to retail clients is prohibited. The regulator noted that the product label is irrelevant and that contracts labeled as “event contracts” can still be classified as MiFID II financial instruments if their underlying falls within derivatives categories. Kalshi, valued at $22 billion in its latest funding round, and Polymarket are being discussed as potential merger targets as the distinction between exchanges, brokerages and sportsbooks blurs. Jump Trading has taken small stakes in Kalshi and Polymarket to provide liquidity. The crackdown applies regardless of whether distribution is limited to retail or non‑retail clients. The regulatory action highlights increasing scrutiny of prediction markets at the intersection of traditional finance and crypto ecosystems.