Europe’s
top securities watchdog put the financial industry on notice today (Tuesday),
warning that perpetual futures and perpetual contracts, products that have
exploded in popularity among crypto traders, are almost certainly covered by
existing EU rules on contracts for differences, regardless of what companies
choose to call them.
The
European Securities and Markets Authority (ESMA) published a public statement
telling investment firms they must carefully assess whether these instruments
fall under the bloc’s CFD product intervention measures.
If they do,
the full set of restrictions applies: leverage caps, mandatory risk warnings,
margin close-out rules, negative balance protection, and a ban on monetary and
non-monetary incentives.
A Name Change Doesn’t
Change the Rules
The core
message from ESMA is blunt: rebranding a product as a “perpetual
future” or “perpetual contract” doesn’t put it outside the
regulator’s reach. What matters is how the instrument actually works, not what
it says on the label.
“The
commercial name provided by firms, for example, “perpetual futures,” is
irrelevant for the categorization under MiFID II,” ESMA wrote in the
statement. A derivative that gives exposure to an underlying asset and isn’t
settled exclusively in physical form “would likely fall in scope of the
product intervention measures on CFDs,” the authority said.
The EU’s
CFD framework traces back to ESMA’s temporary restrictions introduced in 2018,
which were later made permanent by national regulators across member states.
The regulator emphasized that firms cannot sidestep these obligations by adding
features like funding rate mechanisms or voluntary “insurance funds”
– those elements are irrelevant to the legal classification.
Crypto Perpetuals in the
Crosshairs
The timing
of ESMA’s statement is no coincidence. Perpetual futures, instruments with no
expiry date that track prices of assets like Bitcoin and Ethereum through a
funding rate system, have become one of the most traded products in crypto
markets. By the end of
2025, DeFi platforms alone were processing roughly $1.2 trillion in perpetual
futures monthly,
dwarfing spot crypto volumes.
The growth
has caught regulators’ attention. Firms have been racing to offer these
instruments to European retail clients, including through regulated
venues. Amsterdam-based One Trading launched
what it described as the EU’s first regulated crypto perpetual futures platform
under MiFID II rules in April 2025, later expanding
retail access in Germany, the Netherlands, and Austria the following month. The Dutch
regulator subsequently backed One Trading’s push into 24/7 equity perpetuals in January 2026.
Compliance Failures Could
Be Costly
Beyond the
product classification question, ESMA’s statement lays out a checklist of
investor protection requirements that firms must follow when selling these
products – and signals where it thinks some of them are falling short.
On product
governance, ESMA was explicit that these instruments need a “narrow target
market” given their complexity and risk, and that distribution strategy
must match that assessment. Blanket marketing efforts aimed at the general
public are out.
The
regulator was specific: “Mass marketing campaigns, initiatives aimed at
inexperienced investors, or emails and pop-ups to all clients of a firm that
state that such products are now offered and investors should ‘get started now’
should not be considered to be consistent with a narrow target market.”
Firms also
need to run appropriateness checks on retail clients before allowing them to
trade – a standard requirement for complex financial instruments under MiFID
II. And they need to manage conflicts of interest, especially where the
perpetual futures are issued by or traded on a platform belonging to the same
corporate group. ESMA flagged that setup as a “prominent conflict of
interest” that could push firms to steer clients toward their own
products.
There’s a
paperwork requirement too. Under the PRIIPs Regulation, firms distributing
perpetual futures to retail clients must prepare a Key Information Document – a
standardized disclosure used for packaged retail investment products. ESMA said
these instruments qualify as packaged products and therefore trigger that
obligation.
Broader Regulatory
Pressure on CFD Firms
The
statement adds to what has been a busy period for European derivatives
regulation. ESMA finalized new derivatives transparency standards in
December 2025 that will require significant reporting changes from CFD
providers by 2027, while the authority has also flagged
concerns over tokenized stocks and their potential to mislead investors.
Meanwhile,
duplicate reporting obligations under MiFIR, EMIR, and SFTR have been costing
the industry billions each year, a problem ESMA proposed
tackling through a unified reporting framework last June.
Monday’s
statement doesn’t introduce new rules. It’s a warning to firms that the
existing ones apply – and that the regulator is watching. ESMA noted it is
prohibited to participate in any activities aimed at circumventing the product
intervention measures.
This article was written by Damian Chmiel at www.financemagnates.com.
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