Crypto10 September, 20262 min read
ESMA Warns Crypto-Asset Linkages Could Amplify Shocks Across Traditional Finance
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ESMA warns growing crypto ties could amplify shocks in traditional finance. Tokenized equities remain negligible but gaining traction, potentially reshaping market structure.
5 outlets told this the same way.
ESMA flags contagion channels
Europe’s securities regulator ESMA warned that “growing linkage between increasingly vulnerable crypto-asset markets and the broader financial system” could amplify the risk of shocks spreading across traditional finance. In its risk monitoring report published Thursday, ESMA said tokenized equities remain “negligible compared with global stock markets” but are gaining traction, potentially introducing new participants and infrastructure that could reshape market structure. ESMA also pointed to decentralized finance (DeFi) exploits as an area that could deepen links between crypto and traditional markets and increase the potential for financial spillovers.
The regulator further flagged prediction markets as an emerging risk, warning that crypto use in prediction markets can make it harder to detect insider trading, wash trading and coordinated market manipulation. ESMA’s warning comes as prediction markets in the United States face a regulatory battle over whether event contracts fall under federal derivatives law or state gambling rules.
US jurisdiction fight looms
ESMA’s European concerns arrive alongside a US dispute in which the Commodity Futures Trading Commission (CFTC) has issued guidance for prediction markets throughout 2026 while defending what it says is its exclusive jurisdiction over federally regulated event contracts. The CFTC has sued several states, including Kentucky, Minnesota, New Mexico, New York, Illinois and Connecticut, after authorities sought to apply state gambling laws to prediction market operators. On September 2, New Jersey officials petitioned the court to decide whether states can enforce sports gambling laws against prediction markets registered with the CFTC, citing litigation over the issue across at least 20 states.
The dispute could ultimately reach the US Supreme Court, and a future ruling could determine whether state or federal authorities have jurisdiction over prediction markets. Within that policy tension, ESMA’s focus on insider trading and market manipulation in prediction markets ties to how regulators can detect wash trading and coordinated manipulation when crypto tools are involved.
Market reaction and compliance
While ESMA warned of crypto-to-traditional finance linkages, one market snapshot described SoFi Technologies dipping 3% to $17.50 in Wednesday afternoon trade despite reported chatter about a partnership with Kraken for settlement services. That same report said SoFi CEO Anthony Noto told investors the firm “began settling our trading business in SoFiUSD” and started processing on the SoFi Exchange network for its first commercial clients. The ESMA risk monitoring framing also highlighted prediction markets as an emerging concern, warning that crypto use can complicate detection of insider trading, wash trading and coordinated market manipulation.
In the same US context, the report noted that Robinhood selected OG.com as an infrastructure partner for its prediction markets platform and took an equity stake in the exchange engine on September 8. Taken together, ESMA’s emphasis on surveillance and compliance challenges in prediction markets intersects with ongoing product and infrastructure decisions by crypto-adjacent firms.