Blab Crypto
ESMA Targets Prediction-Market Contracts; Zcash Unveils Tachyon Upgrade
On July 3 2026, the European Securities and Markets Authority (ESMA) issued a warning that a growing class of prediction‑market contracts could fall under the EU’s binary‑options ban. The regulator clarified that contracts whose payoff is binary—either a fixed amount or nothing—are prohibited when they qualify as financial instruments for retail clients. ESMA stressed that a product’s function, not its commercial name, determines its regulatory status.
Under MiFID II, the warning applies to contracts that meet the definition of derivatives. Firms offering investment services linked to such products must hold MiFID II authorisation, even if the distribution is limited to non‑retail customers. In addition, the contracts may be subject to national gambling regulations or, if tokenised and not classified as financial instruments, to the Markets in Crypto‑Assets (MiCA) framework.
The statement follows the rapid expansion of prediction‑market platforms that sit at the intersection of finance, betting and blockchain. Companies such as Kalshi and Polymarket have attracted significant investment and are being discussed as potential acquisition targets. Kalshi’s latest funding round in May 2026 raised $200 million, valuing the company at $22 billion, while Jump Trading has taken small stakes in both firms in exchange for liquidity provision.
ESMA’s guidance is intended to clarify that a product marketed as an “event contract” can still be a MiFID II financial instrument if its underlying falls within the derivatives categories. The regulator added that a coupon, reward or interest‑like payment on user funds does not alter the binary structure. Firms are therefore required to assess the legal classification based on the product’s features and functioning.
The binary‑options ban was introduced in 2018 to protect retail investors from high‑risk, gambling‑style products. The ban prohibits the marketing, distribution or sale of binary‑options contracts to retail clients across the EU. By extending the ban’s reach to prediction‑market contracts that meet the binary‑option definition, ESMA is signalling that the regulatory gap left by the MiCA framework will not be exploited.
The implications for the industry are significant. Platforms that previously relied on the flexibility of event contracts may need to redesign their product offerings or seek additional authorisations. The warning also highlights the need for clear product classification and compliance frameworks as the line between traditional finance, betting and decentralized finance continues to blur.
In a separate development, the privacy‑focused cryptocurrency Zcash announced the Tachyon upgrade. The upgrade is designed to scale shielded payments, improve quantum‑readiness and test the resilience of the project’s funding, security and governance structures.
Zcash’s shielded transactions, which use zero‑knowledge proofs to hide sender, receiver and amount, have historically been limited by performance constraints. Tachyon aims to increase transaction throughput and reduce confirmation times for shielded payments, making the privacy feature more practical for everyday use.
The upgrade also includes enhancements to quantum‑resistance. As quantum computing advances, the cryptographic primitives that underpin Zcash’s privacy proofs could become vulnerable. Tachyon incorporates new cryptographic schemes that are believed to be resistant to quantum attacks, thereby future‑proofing the network.
Beyond technical improvements, the Tachyon upgrade is a test of Zcash’s governance model. The project has historically relied on a combination of on‑chain voting and off‑chain stakeholder engagement. The upgrade will require coordination among developers, node operators and the broader community, providing an opportunity to assess the robustness of the funding mechanisms and decision‑making processes.
The announcement comes at a time when privacy coins are under increased regulatory scrutiny. While Zcash has not been directly targeted by the EU’s binary‑options ban, the broader regulatory environment underscores the importance of transparent governance and compliance.
In summary, ESMA’s latest statement expands the scope of the EU’s binary‑options ban to include certain prediction‑market contracts, potentially reshaping how platforms like Kalshi and Polymarket operate within the EU. Meanwhile, Zcash’s Tachyon upgrade seeks to enhance scalability, quantum readiness and governance, positioning the privacy coin for broader adoption.
The regulatory landscape for prediction markets remains fluid, and firms will need to monitor ESMA’s enforcement actions closely. For Zcash, the success of the Tachyon upgrade will be watched by privacy advocates and investors alike as a benchmark for the next generation of privacy‑focused cryptocurrencies.
Under MiFID II, the warning applies to contracts that meet the definition of derivatives. Firms offering investment services linked to such products must hold MiFID II authorisation, even if the distribution is limited to non‑retail customers. In addition, the contracts may be subject to national gambling regulations or, if tokenised and not classified as financial instruments, to the Markets in Crypto‑Assets (MiCA) framework.
The statement follows the rapid expansion of prediction‑market platforms that sit at the intersection of finance, betting and blockchain. Companies such as Kalshi and Polymarket have attracted significant investment and are being discussed as potential acquisition targets. Kalshi’s latest funding round in May 2026 raised $200 million, valuing the company at $22 billion, while Jump Trading has taken small stakes in both firms in exchange for liquidity provision.
ESMA’s guidance is intended to clarify that a product marketed as an “event contract” can still be a MiFID II financial instrument if its underlying falls within the derivatives categories. The regulator added that a coupon, reward or interest‑like payment on user funds does not alter the binary structure. Firms are therefore required to assess the legal classification based on the product’s features and functioning.
The binary‑options ban was introduced in 2018 to protect retail investors from high‑risk, gambling‑style products. The ban prohibits the marketing, distribution or sale of binary‑options contracts to retail clients across the EU. By extending the ban’s reach to prediction‑market contracts that meet the binary‑option definition, ESMA is signalling that the regulatory gap left by the MiCA framework will not be exploited.
The implications for the industry are significant. Platforms that previously relied on the flexibility of event contracts may need to redesign their product offerings or seek additional authorisations. The warning also highlights the need for clear product classification and compliance frameworks as the line between traditional finance, betting and decentralized finance continues to blur.
In a separate development, the privacy‑focused cryptocurrency Zcash announced the Tachyon upgrade. The upgrade is designed to scale shielded payments, improve quantum‑readiness and test the resilience of the project’s funding, security and governance structures.
Zcash’s shielded transactions, which use zero‑knowledge proofs to hide sender, receiver and amount, have historically been limited by performance constraints. Tachyon aims to increase transaction throughput and reduce confirmation times for shielded payments, making the privacy feature more practical for everyday use.
The upgrade also includes enhancements to quantum‑resistance. As quantum computing advances, the cryptographic primitives that underpin Zcash’s privacy proofs could become vulnerable. Tachyon incorporates new cryptographic schemes that are believed to be resistant to quantum attacks, thereby future‑proofing the network.
Beyond technical improvements, the Tachyon upgrade is a test of Zcash’s governance model. The project has historically relied on a combination of on‑chain voting and off‑chain stakeholder engagement. The upgrade will require coordination among developers, node operators and the broader community, providing an opportunity to assess the robustness of the funding mechanisms and decision‑making processes.
The announcement comes at a time when privacy coins are under increased regulatory scrutiny. While Zcash has not been directly targeted by the EU’s binary‑options ban, the broader regulatory environment underscores the importance of transparent governance and compliance.
In summary, ESMA’s latest statement expands the scope of the EU’s binary‑options ban to include certain prediction‑market contracts, potentially reshaping how platforms like Kalshi and Polymarket operate within the EU. Meanwhile, Zcash’s Tachyon upgrade seeks to enhance scalability, quantum readiness and governance, positioning the privacy coin for broader adoption.
The regulatory landscape for prediction markets remains fluid, and firms will need to monitor ESMA’s enforcement actions closely. For Zcash, the success of the Tachyon upgrade will be watched by privacy advocates and investors alike as a benchmark for the next generation of privacy‑focused cryptocurrencies.
