“We Are Not Here To Provide Jobs”: CySEC Chair on Crypto Perps, Prediction Markets and the High-Wire Act of EU Regulation

“Our role as a financial regulator is to safeguard the market; we are not here to provide jobs. This may sound blunt, but the reality is that even if entities employ large sales teams, that cannot justify non-compliance with the regulatory framework,” says George Theocharides, CySEC’s Chairman.

In Nicosia, where the Mediterranean sun is often sharp enough to act as a disinfectant, there seems to be little in the way of regulatory shade.

And on this particular morning, as light pours through the windows of CySEC’s headquarters, the Chairman is in a reflective, if uncompromising, mood.

The Friction Between Protection and Growth

In the past decade, Cyprus and particularly Limassol, has felt like the frontier. By the end of 2013, CySEC supervised 152 Cyprus Investment Firms (CIFs), the legal category for the island’s retail brokers.

The market continued to grow, with retail brokers employing between 7,000 and 8,000 people as of 2024. Glassdoor estimates the median total pay at €30,000.

In an economy where roughly 40% of people gross less than €1,500 a month, according to 2025 figures from the Statistical Service of Cyprus, the sector is not merely a line item in the GDP; it has emerged as a vital organ of the local economy.

But as ESMA tightened its grip from Paris towards the end of the noughties, the growth of the local market ground to a standstill: between 2020 and 2025, the number of CIFs went from 242 to 252.

The frontier, it seems, has been thoroughly fenced in.

“We're following the EU rules,” Theocharides goes on. “Whatever CySEC is doing in terms of the CFD market is not a standalone initiative. We're part of a union and, as such, we have a responsibility to apply and enforce the EU rules and directives.”

The friction remains: maintaining a competitive retail brokerage sector and the benefits to the local economy, while satisfying the regulatory demands at the EU level to protect retail investors.

It is a high-wire act, especially when retail speculation is viewed with extreme suspicion.

And the latest item that reveals this friction is crypto perps.

“We Had a Different Legal Opinion for the Classification of Crypto Perps"

In early 2026, ESMA released a statement indicating that crypto perpetuals, which are derivative instruments with no expiry date that track the price of cryptocurrencies, would likely fall under the product intervention measures established in 2018.

Their commercial name is irrelevant, ESMA said. Essentially, Paris has decided that if an instrument quacks like a CFD, it must be treated like a CFD.

This is an area CySEC had extensively assessed over the previous year, and for a moment, Nicosia was veering off the beaten path.

“We had a different legal opinion for the classification of these contracts, and we raised our views,” Theocharides explains.

CySEC’s analysts felt there were substantive differences between CFDs and crypto perps, technical nuances significant enough that they should have been classified as an entirely different species of derivative.

“We felt that if the risks to investors remain, then these products should have been examined independently”, he adds.

Alas, in the EU, differences in legal opinions are as common as dirt, and usually just as immovable. Most regulators in the bloc saw only a CFD in a digital hoodie.

“Now that the statement has been published, we are assessing it and will soon provide guidance to the market on how this particular position should be interpreted,” Theocharides highlights.

While hinting that there might be some wiggle room, he is reluctant to disclose the nature of that space. The message, though, is clear: the ESMA statement will be honoured. “We are a union of 27 member states; we have to converge in our practices.”

For the industry, the writing was on the wall. Providers had already clipped leverage on crypto perps for European clients to 10x, orders of magnitude lower than their offshore counterparts.

The most likely scenario now is that leverage will be throttled down to 2x. Marketing will be restricted, and negative balance protection will become mandatory, among other things.

This also points to the direction of survival. As speculation in any form is increasingly hindered, the pivot toward spot markets, equities, tokenised or otherwise, and hard assets becomes a one-way street.

The Transatlantic Schism

While Europe prepares to wrap crypto perps in Paris-mandated bubble wrap, across the Atlantic, the mood is markedly different.

Michael Selig, the Chairman of the US Commodity Futures Trading Commission (CFTC), recently announced plans to create a dedicated framework for crypto perps. The goal is simple: to bring back the liquidity that fled to offshore markets.

“That was not the case with the CFTC or the SEC a year ago,” Theocharides comments, pointing at the inherent volatility of the American decision-making process.

If Europe can be characterised as a steady, if slow, steamship, then the US nowadays seems like a speedboat prone to sudden, violent turns of the rudder.

Theocharides appears unconcerned by the prospect of an exodus of providers. He argues that these companies aren't in Europe just to sell speculative instruments.

“They provide cryptos in the spot markets, and they are expanding into other products, like tokenised equities,” he explains. “Crypto perps are just one, speculative, high-risk product. They have other products that they want to offer to European investors, and we applaud that; is what we want. We want European retail investors to have the ability to trade a range of ETFs, stocks, bonds and not only speculative products.

“Predictions Markets Would Most Likely Fall Within the Binary Options Category”

If there is one item that has captivated the retail cohort in 2026, it would be prediction markets.

These peer-to-peer exchanges, where users buy and sell contracts on anything from the Champions League final between Arsenal and PSG to the outcome of political conflicts, are exploding in the US.

Research by blockchain intelligence company TRM Labs shows that, even though they represent a fraction of the global equity and derivatives market, their growth is staggering: between 2024 and 2026, prediction market volumes have grown roughly 4-5x, a far steeper year-on-year curve than most equities or ETF sectors.

To their proponents, they represent the "wisdom of crowds."

To Theocharides, they look like a familiar ghost.

“To be honest, there wasn’t any discussion at the EU level about prediction markets, at least not at the board level. My view is that these prediction markets or event markets would most likely fall within the binary options category.”

In the EU, binary options are persona non grata, banned for years. If prediction markets are indeed just binary options in a sleeker suit, their arrival in Europe will likely be met with a closed door and a reinforced lock.

Much like crypto perps, their wings might be clipped before they have had a chance to fly.

On Polymarket, a prediction market, you can buy a contract on Elon Must's tweet count

ESMA Self-Reflects, But Not For Derivatives

Around the same time ESMA took aim at crypto perps, it released the recommendations for its 2025 Call for Evidence on how to make it easier for retail investors to participate in capital markets.

It was a rare admission that a decade of red tape may have actually discouraged engagement.

The diagnosis included cost structures and labyrinthine disclosure procedures. Yet, this self-reflection appears to stop at the doorstep of derivatives.

The prevailing sensitivity toward protecting the retail cohort (whether this is paternalistic or merely prudent depends on the spectator) rests on the idea that these products are so complex that they dupe traders.

But in an age of total information saturation, does that still hold water?

“I think we need more financial literacy,” Theocharides opines. “When it comes to speculative products, especially where the underlying asset is crypto, you need to be careful; you need to understand the risk that you might lose all your investment. There are additionally other risks, like cyberattacks, that you need to take into account.”

Yet, in the psychological reality of the Greater Fool, the ego-driven dreamer believes they are part of the lucky 10% who will emerge victorious from a zero-sum game. They are quintessentially quixotic.

But ignoring a risk is not the same as being unaware of it.

Theocharides still argues that literacy is the only cure: “If you want to do it, that's fine, but you will have to demonstrate that you understand the risks.”

Have EU Rules Pushed Traders to Offshore?

The emergence of Gen Z as a market force has complicated this approach. Biologically predisposed to risk – the prefrontal cortex, which modulates impulse, doesn’t fully develop until the mid-twenties – this cohort naturally gravitates toward high leverage and crypto.

ESMA’s solution is to offer more straightforward products like ETFs. It feels like placing a garden salad next to a bucket of extra-crispy fried chicken on a buffet. The salad is objectively better for you, but it doesn't provide the dopamine hit the diner came for.

“As an investor, having a diversified portfolio makes sense, right? Having asset classes that are not perfectly correlated,” Theocharides says. “And for that to happen, you have to give them choices, but, equally important, to improve their level of understanding of the capital markets.”

Still, this might ignore another reason young people gravitate towards riskier instruments: as median income has detached from wealth generation, waiting patiently for the compounding effects of an ETF no longer seems appetising.

The data also suggest a darker outcome.

According to an FM Intelligence Report for Q2 2025, the global retail FX/CFD industry recorded average monthly volumes exceeding US$30 trillion, but most of the action was happening outside the EU or even the UK.

The bulk is coming from Asian markets and other jurisdictions where the regulatory touch is light and offshore entities find a hospitable refuge.

EU rules have, in part, shifted demand toward offshore jurisdictions where safeguards are nonexistent.

So, would it be fair to say that the EU’s intentions to protect investors have had a counterintuitive effect by making them less safe in practice?

Theocharides nods in contemplation, hands wrapped around his chest. “I understand your point, but the expectation of the intervention measures is to limit the ability of European investors to take excessive risks by controlling the leverage they are exposed to, getting more transparency in terms of risks and so on,” he replies.

He points out that third-party entities are strictly forbidden from soliciting European clients. Of course, in the age of Discord and Telegram, solicitation is a fluid concept.

“I’m not saying it’s perfect. There are difficulties,” he says. “But the message is clear: be careful, because if we find out that you are attempting to do this, we will take drastic measures that will not be in your interest.”

CySEC Will Not Ban Ads

The CFD sector has an undeniable image problem, a legacy of the aggressive churn-and-burn marketing of a decade ago.

For Theocharides, it is this legacy that has led some jurisdictions, such as Spain, to impose outright bans on CFD advertising a few years ago.

Nonetheless, he is adamant that CySEC will not follow Spain’s lead. “That’s not something on CySEC’s agenda,” he says categorically.

However, he remains unmoved by the economic argument for leniency. His earlier blunt reminder that CySEC is not a job-creation agency is a signal to the brokers in Limassol: compliance is the only currency that matters in Nicosia.