ESMA reminds firms of CFD product intervention obligations

RegCORE Client Alert | Capital Markets Union + Savings and Investment Union

Quick Take

On 24 February 2026, the European Securities and Markets Authority (ESMA) issued a public statement addressing the increasing prevalence of derivatives marketed as "perpetual futures" or "perpetual contracts", particularly those providing leveraged exposure to crypto-assets such as Bitcoin and Ethereum.

ESMA serves as a formal reminder that such products are likely to fall within the scope of the national product intervention measures on contracts for differences (CFDs) originally adopted pursuant to ESMA Decision (EU) 2018/796 and subsequently enshrined in permanent national measures by National Competent Authorities (NCAs) across the EU.See here.Show Footnote

ESMA has emphasised that, in this context, the commercial name provided by firms (e.g. "perpetual futures") is irrelevant for the categorisation under MiFID II of products distributed, marketed or offered to clients.See here.Show Footnote ESMA thus expects that firms conduct a careful legal analysis of these products and their functioning in order to determine whether they may fall within the scope of application of CFD-linked product intervention measures.See here.Show Footnote

This analysis must be conducted on a product-by-product basis and must consider the substantive economic characteristics and mechanics of each derivative, rather than relying on the terminology used in marketing materials or product documentation.See here.Show Footnote

Key takeaways

Firms offering derivatives – particularly those marketed as "perpetual futures" or "perpetual contracts" with exposure to crypto-assets – may wish to consider the following immediate action points:

1. Conduct a thorough legal analysis of each product to determine whether it falls within the scope of the national CFD product intervention measures. This analysis must examine the substantive characteristics and functioning of each derivative, not its commercial name, and must consider whether the product provides leveraged exposure to price fluctuations in an underlying asset with cash settlement capability. Firms must adhere at all times to the overarching obligation to act honestly, fairly and professionally in accordance with the best interests of clients.See here.Show Footnote
2. Do not rely on commercial naming conventions as a basis for regulatory classification. ESMA has made clear that the commercial name provided by firms is irrelevant for the categorisation of products under MiFID II. A product named "perpetual future" or "perpetual contract" may nonetheless constitute a CFD for regulatory purposes if its substantive characteristics fall within the CFD definition.See here.Show Footnote
3. Implement or verify compliance with the CFD product intervention measures where applicable, including leverage limits, mandatory risk warnings, margin close-out requirements, negative balance protection, and the prohibition of monetary and non-monetary benefits.See here.Show Footnote
4. Review product governance arrangements to ensure that target market assessments reflect the complex and risky nature of leveraged derivatives and that distribution strategies are appropriately narrow.See here.Show Footnote
5. Assess and manage conflicts of interest, particularly where derivatives are issued by or traded on platforms operated by group entities.See here.Show Footnote
6. Ensure PRIIPs compliance by preparing Key Information Documents (KID) for any packaged investment products distributed to retail clients.See here.Show Footnote
7. Refrain from circumvention activities, which are expressly prohibited under the product intervention framework.See here.Show Footnote

In light of the above, firms should consider looking at the wider key considerations that flow from this announcement.

Key considerations

The CFD definition: The regulatory definition of a CFD is deliberately broad. It captures any derivative (other than an option, future, swap or forward rate agreement) that provides long or short exposure to price fluctuations in an underlying and that may be cash-settled.See here.Show Footnote This definition extends to financial instruments across several MiFID II categories, including those listed in (4), (9) and (10) under Section C in Annex I.See here.Show Footnote In addition, the statement draws firms' attention to the application of certain investor protection requirements established under MiFID II, which apply irrespective of whether a product falls within the scope of the CFD product intervention measures. The decisive factor is always the economic substance of the product, not its commercial label.See here.Show Footnote

Product features that do not exclude CFD classification: ESMA's statement confirms that the following circumstances and features are irrelevant to the classification analysis:

• Trading venue: Whether a product trades on a regulated platform or a crypto exchange does not affect its status.
• Funding rates: Periodic settlement mechanisms designed to align contract and spot prices do not alter the CFD characterisation, they may even reinforce it.
• Voluntary protections: Self-imposed safeguards such as negative balance protection or "insurance funds" cannot be relied upon to escape mandatory product intervention requirements.

Accordingly, derivatives providing leveraged exposure to an underlying with cash settlement capability are likely to be captured by the CFD product intervention measures regardless, unless they classify as one of the products excluded by the definition in the ESMA Decision.See here.Show Footnote

MiFID II Investor Protection: Beyond the CFD-specific measures, the broader MiFID II investor protection framework applies to all leveraged derivatives, regardless of how they are named.See here and here.Show Footnote

Areas warranting particular attention include:

• Product governance: The complex and high-risk nature of these products typically necessitates a narrow target market. Mass marketing campaigns or generic "get started now" communications are unlikely to be consistent with such a target market.
• Appropriateness: An appropriateness assessment is required for non-advised services involving complex instruments.
• Conflicts of interest: Vertically integrated business models, common in the crypto sector, raise acute conflict risks where an entity both issues derivatives and operates the trading platform.
• PRIIPs: These products qualify as packaged retail investment products, triggering the obligation to provide KID.See here.Show Footnote

Beyond the core CFD and MiFID II requirements discussed above, firms should also be aware of a broader set of regulatory obligations that may apply to their activities in this space.

Additional regulatory considerations

The announcement also raises the further issues, set out below: 

• The MiCAR / MiFID II boundary: Firms must carefully assess whether the underlying crypto-asset is itself subject to MiCAR (e.g., as an asset-referenced token or e-money token) or falls outside MiCAR's scope (e.g., as a financial instrument). Where a derivative references a MiCAR-regulated crypto-asset as its underlying, the derivative itself remains subject to MiFID II/MiFIR, but the classification of the underlying may have implications for custody, disclosure and conduct obligations. This boundary analysis is essential and should be conducted on a product-by-product basis.
• Cross-border and third-country considerations: The statement does not address the position of firms established outside the EU that offer perpetual futures or similar products to EU retail clients. Such firms may not rely on reverse solicitation where products are actively marketed into the EU, and NCAs have demonstrated an increased willingness to take enforcement action against unauthorised cross-border offerings. Firms should assess their distribution arrangements and consider whether EU authorisation or reliance on a licensed intermediary is required.
• Marketing and communications: Beyond product governance, firms must ensure that all marketing communications comply with ESMA's Guidelines on marketing communications issued pursuant to MiFID II. This includes ensuring that communications are fair, clear and not misleading, that risk warnings are sufficiently prominent, and that performance claims are balanced with appropriate risk disclosures. The use of social media, influencer marketing and affiliate arrangements, which are prevalent in the crypto sector, raises particular compliance risks and warrants enhanced scrutiny.
• Transaction reporting and record-keeping: Firms authorised under MiFID II must comply with transaction reporting obligations under MiFIR. Where perpetual futures or similar products are reportable instruments, firms must ensure accurate and timely reporting to their NCA or an approved reporting mechanism. Additionally, standard MiFID II record-keeping requirements apply, including the retention of records relating to client orders, transactions and communications.
• AML/CFT obligations: Given the crypto-asset nexus, firms distributing these products must also consider their obligations under the EU Anti-Money Laundering Directives and new AML Regulation and, where applicable, MiCAR's AML provisions. Enhanced customer due diligence may be warranted where products involve crypto-assets or where clients present elevated risk profiles. Firms should ensure that their AML/CFT frameworks are calibrated to address the specific risks arising from crypto-derivative distribution.
• Enforcement landscape: NCAs across the EU have taken supervisory and enforcement action against firms offering CFDs, including crypto-CFDs, in breach of product intervention measures. Firms should monitor published enforcement decisions and supervisory statements from their home NCA and consider whether any remedial action is required in respect of current product offerings or past conduct.

Taking stock of these regulatory requirements and considerations, it is clear that ESMA's statement has significant implications for firms operating in the crypto-derivatives market.  

Outlook

ESMA underscores a clear regulatory message: the commercial labelling of derivatives is irrelevant to their regulatory treatment. What matters is substance over form. Firms offering products such as "perpetual futures" or "perpetual contracts" must conduct a rigorous product-by-product analysis to determine whether these derivatives fall within the scope of the CFD product intervention measures and ensure full compliance with applicable MiFID II investor protection requirements, including product governance, appropriateness assessments, conflicts of interest management, and PRIIPs obligations.

The statement signals heightened supervisory focus on the crypto-derivatives market, with NCAs across the EU expected to adopt a consistent approach in line with ESMA's guidance. Continued regulatory scrutiny and potential enforcement action may be anticipated where products are marketed in a manner that circumvents the protective intent of the CFD framework. Firms should also be mindful of the regulatory boundary between crypto-assets governed by MiCAR and crypto-derivatives remaining subject to MiFID II/MiFIR.

In light of these developments, a review of current product offerings, distribution practices, and internal arrangements to ensure alignment with ESMA's clarifications and the ESMA Guidelines on MiFID II product governance requirements may be warranted.

About us

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If you would like to discuss any of the developments mentioned above, or how they may affect your business more generally, please contact any of our key contacts or PwC Legal’s RegCORE Team via de_regcore@pwc.com or our website.