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Sep 14, 2026

Regulation of Finfluencers—What Should Be Considered?

So-called “finfluencers” are social media influencers or content creators on platforms such as Instagram or TikTok who use their content to help their audience or followers better understand financial topics, investment ideas, and investment products. The fact that there is an ever-growing need for this is particularly evident in the 18- to 45-year-old age group, where many people turn to social media platforms to learn about financial topics. Many of these people view finfluencers as a good alternative to advice from traditional channels such as banks or similar institutions. While finfluencers can certainly perform valuable educational work by providing information and sharing knowledge, there are still dubious actors among them. These promote, for example, products that may not be suitable—or may not be as suitable—for potential investors in their audience, yet present them as suitable; or they exaggerate potential returns or downplay the risks associated with the advertised products. The offerors or issuers of the advertised products frequently pay finfluencers—in some cases substantial sums—for the reach and advertising they provide. Many users are completely unaware that finfluencers often receive payment, gifts, or other perks from their clients—that is, those who ultimately have a vested interest in selling the advertised products—in exchange for their posts and product recommendations.

Are Finfluencers Subject to Licensing Requirements and to BaFin Supervision?

With regard to regulatory authorisation requirements and the associated supervision by BaFin, there are certainly potential pitfalls for finfluencers. For example, the activity of investment advice—which requires authorization  under the German Banking Act (KWG) or the German Securities Trading Act (WpIG)—occurs when personal recommendations relating to transactions involving specific financial instruments are provided to clients or their representatives, provided that the recommendation is based on an assessment of the investor’s personal circumstances or is presented as suitable for them, and is not disclosed exclusively through information dissemination channels or to the general public. Since finfluencers typically direct their posts to the general public via information dissemination channels and do not have direct contact with clients—and thus the recommendation is not personalized—they generally do not meet the legal definition of investment advice. Nevertheless, legal uncertainties do arise in this context. This is because publicly expressed opinions on price trends or investment strategies may, according to a warning from ESMA, be legally qualified as an investment recommendation or an investment strategy recommendation under the European Market Abuse Regulation (MAR) or the German Securities Trading Act (WpHG), which may, in some cases, entail an obligation to register with BaFin. Furthermore, there is a risk that finfluencers could, through their activities, aid and abet the provision of unauthorized financial services. This could be the case, for example, if they advertise platforms or products that do not possess the required BaFin authorization. In such cases, the finfluencer in question may themselves become the target of regulatory measures or even face criminal charges for aiding and abetting the provision of unauthorized financial services.

Regulators Impose High Standards for Legitimacy

Finfluencers must, under all circumstances, comply with applicable regulatory requirements and due diligence obligations when carrying out their activities. In this context, the finfluencer’s expertise is considered an absolute prerequisite for conducting this activity in compliance with the law. These individuals may only discuss financial products that they fully understand themselves—and only if they do not pretend to possess expertise that they do not actually have. In addition, a strict obligation of transparency applies. The fact that a post constitutes a paid advertising partnership in exchange for monetary compensation or other benefits must be clearly and unambiguously disclosed. In this regard, the disclosure of these facts must be understandable, and the relevant information must be easily recognizable—it must not be hidden in hashtags or in fine print. The finfluencer’s personal interest in the products—for example, because they have invested in them themselves and would therefore benefit from rising prices—must also be disclosed to the audience in a timely and honest manner; otherwise, this could constitute unlawful market manipulation. Furthermore, BaFin and ESMA also require fairness and risk transparency from those involved. Accordingly, the information provided must be truthful and clear. Furthermore, a precise distinction must be made between facts and opinions. Particularly in the case of high-risk products such as futures or cryptocurrencies, the possibility of incurring losses must be clearly highlighted. Psychological pressure tactics (FOMO) or unscrupulous promises (“get rich quick”) must not be included in the content. It is the responsibility of the finfluencers themselves to conduct due diligence in advance to verify whether advertised partners or platforms hold the necessary regulatory approvals. It is also the finfluencer’s own responsibility to verify and ensure compliance with all other legal obligations, such as fulfilling any applicable registration requirements as a creator or distributor of investment recommendations or investment strategy recommendations.

Attorney Dr. Lutz Auffenberg, LL.M. (London)

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    Sep 07, 2026

    Shopping Budget for the AI Agent – Do Agentic Payments Require Authorization Under the ZAG?

    AI technology has long since permeated every aspect of daily life. AI agents are used in nearly every aspect of personal and professional life and are handling their assigned tasks with increasing comprehensiveness. It was therefore only a matter of time before AI agents were allocated specific budgets to carry out their tasks. Recently, for example, Adyen, one of the world’s largest payment providers, introduced “Adyen Agentic,” a new tool designed to handle AI-triggered payments. It is clear that AI-supported services—such as organizing vacations or business trips, including flight, hotel, and rental car bookings, or AI-automated shopping for coordinating outfits based on the latest fashion trends and the user’s specified preferences—will become even more efficient once the AI user no longer has to handle the payment for services or goods themselves. Instead, the AI agent is simply given budgets and specific instructions—for example, regarding prices and delivery times acceptable to the user—and then handles everything else, just like a real assistant. For providers of such AI-powered shopping assistants, this raises the question of whether accepting budgets and making payments constitute payment services subject to licensing under Section 10(1) of the Payment Services Supervision Act (ZAG). If this were the case, a further question arises as to how such business models can be structured in compliance with regulatory requirements.

    Can AI Actually Provide Payment Services?

    In general, AI-based applications such as AI agents remain merely software and are therefore tools. As such, AI does not, in principle, have its own legal personality and therefore cannot, in and of itself, be subject to regulatory licensing requirements. However, in the vast majority of cases, there is an identifiable provider behind the AI agent who may be subject to obligations under the applicable regulatory provisions. In the case of the integration of payment services, the question of whether a license is required under Section 10(1) of the German Payment Services Act (ZAG) depends on exactly what the AI agent is intended to do in connection with payment transactions. For example, if funds are transferred to the provider’s accounts or wallets and used from there to pay for goods and services, this could constitute money remittance service, which is subject to licensing. If, instead, the AI agent were able to initiate payments from a user’s bank account—for example, because the AI agent is provided with the necessary online banking credentials—this could be classified as a payment initiation service requiring authorization within the meaning of Section 1(1), sentence 2, No. 7 of the ZAG. If the provider of the AI agent even sets up payment accounts in the user’s name, deposit and withdrawal transactions under Section 1(1), sentence 2, nos. 1 and 2 of the ZAG may also come into play. However, in all cases, the exceptions listed in Section 2(1) of the ZAG must also be taken into account. Of particular interest in the case of AI-based shopping assistants is the commercial agent exception under Section 2(1) of the ZAG. According to this provision, payment transactions are not considered payment services if they are carried out through a central clearing house or commercial agent who has been granted authority to negotiate or conclude contracts by either the payer or the payee for the purchase or sale of goods or services. If an AI shopping assistant acts exclusively in the user’s interest, there would, in principle, be grounds for this exception.

    What Opportunities Does Agentic Payments Offer to Licensed Payment Service Providers?

    Not only online store operators but also payment providers should respond to the trend of delegating purchasing decisions to AI agents. AI agents will make purchasing decisions dispassionately, based solely on the specifications of the prompt and their user. Traditional marketing psychology will therefore no longer work in online stores as it has in the past. Payment providers will need to ensure that AI agents used as shopping assistants have access to all necessary payment methods so that the AI can make the right decision for the user in terms of transaction costs and security and, above all, achieve the broadest possible integration with retail outlets. Already-licensed payment institutions can, in principle, also use their license under Section 10(1) ZAG for new business areas in the sphere of agentic payments and thus tap into new business opportunities. The development of proprietary AI-compatible products is possible, though this requires going through a new product process in accordance with AT 8.1 ZAG-MaRisk. In addition to developing their own offerings, authorized payment institutions can also provide their regulatory infrastructure to AI startups and, through an outsourcing solution, enable those startups’ business models to comply with the ZAG. In any case, Agentic Payments have strong disruptive potential in the payment services industry and thus offer opportunities for innovation and growth that cannot be ignored.

    Attorney Dr. Lutz Auffenberg, LL.M. (London)

    I.  https://fin-law.de

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      Aug 10, 2026

      Payment Services Using E-Money Tokens – What Exceptions Should Be Provided for Under PSD3/PSR?

      Last summer, the European Banking Authority (EBA) caused quite a stir with its Opinion of June 10, 2026 regarding the interaction betweenSecond Payment Services Directive (PSD2) and MiCAR in the context of e-money tokens (EMT). With e-money tokens, the MiCAR regulator had created a new form of e-money. However, it had not sufficiently considered that e-money qualifies as funds within the meaning of the Second Payment Services Directive (PSD2) and that, as a result, the provision of certain crypto-asset services using EMTs may involve not only crypto-asset services requiring authorization but also payment services requiring a authorization. Consequently, such service providers require both a MiCAR authorization and a license under payment services supervisory law—in Germany, issued by BaFin pursuant to the Payment Services Supervision Act (ZAG). According to the EBA’s Opinion, this issue is particularly relevant in the area of crypto custody within the meaning of Art. 3(1)(17) MiCAR, to the extent that it is offered in connection with EMT. This service may also constitute the operation of a payment account, which requires authorization and would be classified under German law as a deposit and withdrawal transaction pursuant to Section 1(1), sentence 2, nos. 1 and 2 of the ZAG. According to the EBA’s clarification, transfer services for crypto-assets for customers within the meaning of Article 3(1)(26) of MiCAR may also constitute payment services subject to authorization. By contrast, the exchange of crypto-assets for a money amount and the exchange of crypto-assets for other crypto-assets, as defined in Article 3(1)(19) and (20) of MiCAR, shall not be considered payment services.

      Additions to the List of Exceptions for EMT in the Final Drafts of PSD3/PSR

      In essence, it is apparent that the provision of a specific service should ultimately be subject to a regulatory regime only to the extent necessary to enable it to be effectively supervised by the supervisory authorities. The final compromise drafts of the future third Payment Services Directive (PSD3-E) and the Payment Services Regulation (PSR-E), which have been available since April 2026, therefore provide for new exemptions for these cases. Article 2(2)(a1) of the PSR-E clarifies that payment transactions conducted exclusively in EMT directly from the payer to the payee without any involvement of intermediaries shall not fall within the scope of the PSR. Furthermore, pursuant to Article 2(2)lit. ha of the PSR-E, payment transactions executed by crypto-asset service providers (CASP) acting as intermediaries between buyers and sellers of EMT, in which EMT is exchanged for other EMT or other crypto-assets, are to be excluded from the scope of the PSR. The exchange of EMT for funds or other crypto-assets is also to be excluded if the CASP acts in its own name. Finally, another new exemption is provided for in Article 2(2) lit. la of the PSR-E, according to which payment transactions between CASPs or their branches for their own account are not to fall within the scope of the future PSR. This latest new exemption therefore applies not only to payment transactions involving EMT, but generally to payment transactions involving all types of monetary amounts between CASPs. In accordance with Article 1(3) of the PSD3-E, all of the new exemptions mentioned are intended to apply equally to the provisions of the future PSD3.

      Dual Authorisation Requirement for CASPs Under MICAR and ZAG Will Remain Possible in the Future

      While the new exemptions under the draft PSD3/PSR regulations exclude certain scenarios from the scope of payment services supervisory law. However, even under the new rules, there will still be many areas in which companies will be subject to supervision under both the provisions of MiCAR and those of the applicable payment services supervisory law. In Germany, these companies will require authorization under Art. 59 et seq. MiCAR and a authorization pursuant to Section 10(1) ZAG, unless other exemptions applicable to their specific business model can be invoked. In particular—as already noted in the interpretation of the cited EBA Opinion—trading activities that qualify as the exchange of crypto-assets for fiat currency or other crypto-assets are given preferential treatment. With the exception of payment transactions directly between authorized CASPs, the problem will persist that CASPs may provide payment services not only for EMT transactions but also, more generally, for fiat currency transactions—including all forms of e-money—as provided for in their respective business models, which they are not permitted to do without an additional license under Section 10(1) of the ZAG. Particularly common in this context are cases involving the transfer of funds, such as when customer funds are paid out to third parties in accordance with instructions. Such activities often constitute a financial transfer business that requires a license. In any case, it is worthwhile for companies to have their business model reviewed from a regulatory perspective by a specialized attorney in order to identify any problematic processes early on and, if necessary, restructure them.

      Attorney Dr. Lutz Auffenberg, LL.M. (London)

      I.  https://fin-law.de

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        Aug 03, 2026

        New BaFin Circular – Can Asset Investments Still Be Packaged Products Under the PRIIPs Regulation?

        Asset investments continue to enjoy unwavering popularity in Germany as a means of financing companies and projects, and are defined and regulated by the Asset Investment Act (VermAnlG). Therefore, anyone wishing to issue such an asset investment and offer it publicly in Germany must comply with the regulatory requirements of the VermAnlG. However, the VermAnlG applies only if the offering does not fall within the scope of European Regulation (EU) 2020/1503 (Crowdfunding Regulation) or Regulation (EU) 2023/1114 (MiCAR). According to the wording of section 1(2) of the VermAnlG, products may not constitute asset investments within the meaning of the law if they qualify as securities under the Securities Prospectus Act or as units in investment funds under the Capital Investment Code, or if the funds raised are classified as deposits under the German Banking Act. However, if the product to be issued is an asset investment to which the VermAnlG applies, issuers and offerors must, among other things, also comply with the documentation and prospectus requirements arising from the VermAnlG. But what specific obligations must issuers and offerors fulfill in this context?

        What Prospectus and Documentation Requirements Must Providers of Asset Investments Comply With?

        In general, providers must prepare a sales prospectus in accordance with the requirements of sections 6 et seq. of the  VermAnlG before commencing a public offering of asset investments, have it approved by BaFin as the competent supervisory authority, and then publish this sales prospectus. However, the VermAnlG also provides for exceptions to these obligations. For example, offerings limited to twenty units of the same type of asset investment do not require a prospectus. The same applies to offerings whose total volume does not exceed EUR 100,000, as well as to offerings whose price per single unit is not less than EUR 200,000. In addition, there are exceptions for crowdfunding projects under the VermAnlG, as well as social projects and charitable and religious projects. In addition to the requirement to publish an approved sales prospectus, providers of asset investments must generally also prepare a so-called Asset Investment Information Sheet (VIB) and file it with BaFin after receiving its approval. This requirement also applies to asset investments for which a public offering is permitted without a sales prospectus because they fall under the exception for crowdfunding projects under the VermAnlG or under the exception for social projects. However, the obligation to prepare and file a VIB does not apply in any case if a Key Information Document (BIB) must already be published for the public offering of the asset investment in accordance with Regulation (EU) No. 1286/2014 (PRIIPs Regulation).

        When is a KID Required for Asset Investments?

        Under the PRIIPs Regulation, manufacturers of packaged investment products for retail investors must prepare and publish a KID. In such cases, the provider must, in any event, also target retail investors in the public offering of the asset investment. It can be difficult to determine on a case-by-case basis when a product is “packaged” within the meaning of the PRIIPs Regulation. Under the PRIIPs Regulation, a product is considered a packaged investment product if the amount to be repaid is subject to fluctuations due to its dependence on reference values or the performance of one or more assets that are not directly acquired by investors. According to BaFin, the amount to be repaid includes both interest and principal. BaFin further notes that the type of reference value is also a factor. According to this, the repayment amount’s dependence on internal reference values or interest rate indices—such as the Euribor—does not constitute a packaged product; dependence on external reference values, on the other hand, does. The exact classification is therefore always a matter of the individual case.

        According to the BaFin Circular of July 27, 2026, Asset Investments are Rarely Packaged Products

        In its circular dated July 27, 2026, BaFin now clarifies that it generally does not classify asset investments as packaged investment products under the PRIIPs Regulation. It justifies this by stating that asset investments typically have the character of equity interests in companies and are therefore comparable to stocks. Such equity interests are exempt from the PRIIPs Regulation. According to this, the key factor in classifying asset investments is generally that they serve an equity-like function. Asset investments are therefore either part of the issuer’s equity or, in principle, have an equity-like character. Consequently, most asset investments are generally not to be classified as packaged investment products within the meaning of the PRIIPs Regulation. Already in the first part of the circular—the introduction—BaFin clarifies that providers of asset investments must therefore generally prepare a VIB and have it approved by BaFin. The approved VIB must then be filed with BaFin. Providers of asset investments that are planning a public offering in the future should be sure to take this clarification from BaFin into account in their planning and when drafting the required documentation. Providers of currently ongoing public offerings, particularly those who have published a BIB for their public offering, should urgently review the documents they have published or filed to ensure they are complete and accurate, or have them reviewed by specialized attorneys.

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          May 19, 2026

          Streamlining Prospectus Regulations – What Changes Will the EU Listing Act Bring in June 2026?

          With the EU Listing Act, the European Union aims to make access to the capital market easier and more cost-effective. In particular, small and medium-sized enterprises (SMEs) should be able to raise capital more easily in the future without being hindered by excessive prospectus requirements. This initiative comes in response to growing criticism that European capital markets have become too bureaucratic and expensive compared to their international counterparts—particularly the United States. In this regard, the reform of the EU Prospectus Regulation specifically targets information and disclosure requirements. While initial changes will apply as soon as the Listing Act enters into force at the end of 2024, the key changes will largely take effect starting in March or June 2026. Of particular relevance is the expansion of existing exemptions from the prospectus requirement. Public offerings with a total consideration of up to 12 million euros within a twelve-month period in the Union will be exempt from the prospectus requirement starting June 5, 2026. Previously, the threshold was 8 million euros. For many growth companies, this means significantly simplified access to the capital market. Issuances by companies whose securities are already admitted to trading on a regulated market will also benefit from the new rules. The EU is thus responding to criticism that secondary issuances have so far entailed high costs and significant time commitments. The aim of the reform was therefore not only to make capital market transactions more efficient, but also to make the European capital market as a whole more attractive and competitive.

          The EU Growth Issuance Prospectus and the EU Follow-on Prospectus as New Formats for Securities Prospectuses

          A key component of the EU Listing Act is the new prospectus formats, which will take effect as early as March 5, 2026. These formats now distinguish between different types of issuers. For companies with securities already admitted to trading on a regulated market, the so-called EU follow-on prospectus is being introduced. The newly introduced EU growth issuance prospectus is intended to be available to small and medium-sized enterprises as well as issuers on SME growth markets and to facilitate fundraising. Both formats are designed to be concise, standardized, and easy to understand. The European regulator’s goal is to reduce preparation costs and improve readability for investors. In addition, mandatory requirements regarding the structure, order, and maximum length of certain prospectuses will be introduced as of June 5, 2026. This is intended to reduce the typical “information overload” that has made many prospectuses virtually unreadable to date. In addition, digital processes will be facilitated or introduced. For example, issuers, offerors, and financial intermediaries will be permitted in certain cases to inform investors exclusively electronically about prospectus supplements. New financial information can also be more easily integrated into existing prospectuses by reference. The shortened deadline for initial public offerings of shares on a regulated market is also likely to be particularly relevant in practice. In the future, prospectuses will only need to be published three working days before the end of the offer period, instead of the previous six. For issuers, this means greater flexibility and faster placements, and thus simpler and faster capital raising.

          ESG Requirements Could Reduce the Simplification Effect

          Despite all these simplifications, however, it remains unclear whether the Listing Act will actually advance the hoped-for “Capital Markets Union.” In particular, the new sustainability disclosures that are also planned could partially offset the simplification intended by the EU Listing Act. Specifically, disclosure requirements regarding ESG will be introduced as of June 5, 2026. These relate to sustainability reporting and compliance with certain sustainability targets. Furthermore, prospectus liability risks will remain significant. The increasing standardization of prospectuses also carries risks. While it improves comparability, it could simultaneously lead to such a standardized form of disclosure that the specific characteristics of individual issuers and their offerings may no longer be adequately taken into account. Nevertheless, the reforms and simplifications represent a step toward easier capital raising in Europe. Especially since the European regulator’s focus in recent years has been almost exclusively on increased compliance obligations, the simplifications mentioned above send a positive signal to the European capital market. It is therefore worthwhile for issuers, offerors, and financial intermediaries to carefully analyze the new prospectus formats and exemptions and to adapt their capital market strategy to the new legal framework now.

          Attorney Dr. Lutz Auffenberg, LL.M. (London)

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            May 12, 2026

            Social Trading and Signal Following – What Regulatory Considerations Do Providers Need to Keep in Mind?

            Over the past few years, numerous platforms have emerged on the market that offer so-called day traders the opportunity to invest directly in various financial instruments without the involvement of a broker. The available product portfolio includes not only traditional spot trades in stocks, debt securities, or cryptocurrencies, but also investments in futures, options, and derivative financial instruments. For day traders who do not have enough time to manage their portfolio themselves, so-called social trading or signal following may be of interest. This allows platform users to follow the trading activities of other platform users and implement their trading decisions at the same time. There are various forms of social trading and signal following, in which customers either have published trading algorithms or trading bots to automatically execute the suggested trading decisions in their account, or simply observe the trading activities of another trader to then decide on a case-by-case basis whether and to what extent a trade should also be executed. Social trading and signal following entail a number of regulatory pitfalls that both clients and providers should be aware of. The regulatory obligations of platform operators, signal providers, and clients differ fundamentally.

            Which Stakeholders Require a BaFin License for Their Role in Social Trading?

            Operators of platforms that enable social trading or signal following generally require regulatory approval to conduct their business. If the trading signals made available relate to financial instruments in the traditional sense, such as stocks, bonds, certificates, futures, or derivatives, the platform operator generally needs authorization to provide the investment services of portfolio management, investment brokerage, or contract brokerage. If trading signals for crypto-assets are published, a licensing requirement under MiCAR may apply for portfolio management, the acceptance and transmission of orders for crypto-assets on behalf of clients, or the execution of orders for crypto-assets on behalf of clients. Users of the platform, on the other hand, do not typically trigger any licensing requirements simply by following signals using their own trading accounts. For signal providers, however, it depends heavily on the specific circumstances of each individual case. To the extent that investment decisions are merely published in the provider’s own securities account, this activity does not yet constitute a licensed activity. However, it is always necessary to carefully examine exactly how the signal provider’s trading decisions are implemented in the user’s account. To the extent that the signal provider receives a genuine mandate to execute trading decisions with effect on the user’s securities account, licensing requirements regarding portfolio management or investment brokerage may apply.

            In Individual Cases, the Issuance of Signals May Trigger a Requirement to Register with BaFin

            Even in situations where the act of providing trading signals does not itself trigger a licensing requirement under Section 15(1) WpIG or Section 32 KWG, signal providers may still be subject to a registration requirement with BaFin. This may be the case if the publication of trading signals is classified as an investment recommendation or an investment strategy recommendation. According to the legal definition in Art. 3(1)(35) MAR, investment recommendations are information containing explicit or implicit recommendations or suggestions regarding investment strategies in relation to one or more financial instruments or issuers, intended for distribution channels or the public, including an assessment of the current or future value or price of such instruments. Investment strategy recommendations, by contrast, are described in Article 3(1)(34) MAR as the production of information that directly or indirectly constitutes a specific investment proposal or, directly, a specific investment decision regarding a financial instrument or an issuer. If the publication of trading signals in social trading or signal following constitutes an investment recommendation or investment strategy recommendation in this sense, the signal provider may be required to register this activity with BaFin pursuant to Section 86 WpHG. In addition, the provider must fulfill certain compliance obligations and organize its business operations accordingly. Particularly relevant in this context is the obligation to disclose, report, and avoid conflicts of interest in accordance with Section 85 of the WpHG. Furthermore, the recommendations themselves must meet content requirements, including, among other things, clear indications distinguishing estimates from facts, the disclosure of relevant sources, and the date and time of publication.

            Attorney Dr. Lutz Auffenberg, LL.M. (London)

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              Apr 27, 2026

              Raising Capital Through a Public Offering

              Traditional bank financing is a type of financing involving many hurdles for many companies, especially for startups and SMEs. For one thing, banks typically require collateral before granting loans. For companies that are just getting started, this can already be a difficult—or even insurmountable—obstacle. On the other hand, banks are generally interested in regular payments consisting of interest and principal, and not so much in, for example, profit sharing or a bullet loan. However, these types of repayment or compensation are very attractive to the companies mentioned above. Investors in the capital market can offer such forms of economic participation. When companies and investors in the capital market come together, this often creates economically attractive options for both sides that can serve as interesting alternatives to traditional bank loans. Of course, if such markets were unregulated, they would pose a significant risk to retail investors and open the door to fraud by unscrupulous providers. For this reason, these markets are regulated in Germany by German and European legislation. Within the framework of these regulations, the term “public offering” frequently arises. For which products does this term play a role, and what exactly does the concept entail?

              What is a Public Offering, and in Which Context is it Important?

              Both Regulation (EU) 2017/1129 (the Prospectus Regulation), which regulates public offerings of securities in Europe, and Regulation (EU) 2023/1114, the Markets in Crypto-Assets Regulation (MiCAR), which establishes rules for crypto-asset markets in Europe, the concept of a public offer is of central importance. In both cases, the offering of the respective regulated products, insofar as it constitutes a public offer, is associated with far-reaching obligations for the respective issuers. The legal definitions are also virtually identical. According to the definition in the Prospectus Regulation, a public offer consists of a communication to the public in any form and by any means that contains sufficient information regarding the terms of the offer and the securities to be offered to enable an investor to decide whether to purchase or subscribe to those securities. If an offer constitutes a public offer within the meaning of the foregoing, this typically results in far-reaching obligations for the offerors and issuers. For securities, a published securities prospectus approved by the competent authority is generally required; for crypto-assets under MiCAR, a published and notified crypto-asset whitepaper is mandatory. These documentation requirements may also be accompanied by obligations regarding the distribution channels for the products. Is raising capital through such products therefore only possible if these extensive obligations are fulfilled?

              Exemptions and Private Placements

              The respective regulations do, however, provide for exceptions. For example, a public offering of securities is possible even without the prior publication of an approved prospectus if the offering is directed only at qualified investors or at fewer than 150 non-qualified investors per EU member state. Similar exemptions can also be found in MiCAR for the public offering of crypto-assets. Both regulations, however, also have their own specific exceptions. The regulation of crypto-assets is, in any case, modeled after the regulation of securities under the Prospectus Regulation. The situation is different, however, with so-called private placements. Although the term originates from securities law, the concept of a private placement is not defined in the Prospectus Regulation. Legal literature defines it as an offering that is not public, since a “personal connection” already exists between the issuer or its agent and the investor prior to the offering. Whether a private placement can also apply to crypto-assets has not yet been fully clarified; however, given MiCAR’s alignment with the Prospectus Regulation, there is strong evidence to suggest it does. Based on the above, startups and SMEs in particular can thus raise capital through products such as securities or crypto-assets—even without first fulfilling extensive documentation requirements—by means of clever structuring.

              Attorney Dr. Lutz Auffenberg, LL.M. (London)

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                Apr 20, 2026

                Are Prediction Market Shares Binary Options?

                The exact legal classification of prediction markets and the shares traded on them has not yet been definitively clarified in Germany and depends largely on the specific circumstances of each individual case. In this regard, classification as gambling is a possibility, in which case the State Treaty on Gambling would serve as the regulatory framework and the Joint Gambling Authority of the German States (GGL) as the supervisory authority. On the other hand, however, classification as a financial instrument under the financial market regulations applicable in Germany and the EU, with the Federal Financial Supervisory Authority (BaFin) as the competent supervisory authority, is also a possibility. The regulatory classification of prediction markets or the shares traded on these platforms depends crucially on their content. Specifically, it will therefore also depend on exactly how the respective share is structured. If, for example, a share concerns the outcome of a Bundesliga soccer match in such a way that platform participants bet on the victory or defeat of the participating soccer clubs, the share embodying this could constitute a sports bet. This would fall under the State Treaty on Gaming and thus be subject to supervision by the GGL. The organizer or intermediary of such sports bets can apply for inclusion on the GGL’s so-called whitelist and, upon approval, legally offer sports betting. But what is the situation if the shares were structured as financial instruments?

                Shares as Financial Instruments on Prediction Markets

                One possible structure for such a share, for example, is as a financial futures contract or a derivative transaction. Financial futures transactions are defined as derivative transactions and warrants. Derivative transactions include, among other things, the purchase, exchange, or other structured fixed-term transactions or option transactions that are to be settled at a later date and that depend on an underlying asset such as securities or money market instruments, interest rates, or emission allowance certificates. Furthermore, certain futures transactions relating to commodities, freight rates, climatic or other physical variables, inflation rates, etc., are included. These derivative transactions generally qualify as financial instruments within the meaning of the financial regulations applicable in Germany and the European Union. Shares in a prediction market based on such a derivative transaction should therefore also qualify as financial instruments. As outlined above, BaFin in Germany is generally the competent supervisory authority for the regulatory oversight of transactions involving such financial instruments. It is also BaFin that grants or denies the necessary licenses for the commercial handling of financial instruments. To operate a platform on which users can purchase prediction market shares from the platform operator or other users, the operator would therefore need to obtain a BaFin license, provided that the shares are structured as derivatives.

                How Does the BaFin’s General Ruling on Binary Options Apply?

                Another regulatory hurdle that operators of prediction markets must take into account is the BaFin general ruling dated July 1, 2019, regarding restrictions on the marketing, distribution, and sale of binary options to retail investors. The general ruling is based on a statement by ESMA, which is why the issue is relevant throughout the EU. Binary options are defined in the general ruling as derivative financial instruments that are settled in cash, where payment is only provided for upon settlement or expiration, and where the payout is limited to a predetermined amount or zero, in the event that the underlying asset of the financial instrument meets one or more predetermined conditions and in the event that it does not meet one or more predetermined conditions. In principle, it is therefore conceivable that shares offered on prediction markets could also meet this definition. This depends on the exact structure of the respective shares. Here, for example, the General Ruling also provides for exceptions for binary options that have a minimum term of 90 days, for which an approved prospectus has been published, and where the provider is not exposed to any market risk during their term. Furthermore, the provider or a company within its group may not realize any profit or loss from the binary option other than the previously disclosed commissions, transaction fees, or other associated fees.

                Attorney Dr. Lutz Auffenberg, LL.M. (London)

                I.  https://fin-law.de

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                  Apr 13, 2026

                  Prediction Markets – What’s Behind the Hype?

                  Prediction markets are currently the talk of the town and are experiencing a veritable boom. These are online platforms where users can buy and sell so-called contracts that depend on whether one or more specific events occur or do not occur. Popular events that are frequently the subject of these contracts include, for example, election outcomes (particularly in U.S. politics), as well as the outcomes of sporting and cultural events, but also events from the financial world, such as central bank interest rate decisions, corporate data, or stock market indices. These platforms are often decentralized and built on blockchains such as the Ethereum blockchain. Specifically, users of these platforms purchase shares or contracts that bet on either the occurrence or non-occurrence of the event in question. The price of the respective shares is determined by supply and demand regarding the occurrence or non-occurrence of the event in question. If many users bet on the event occurring, the price of the shares that reward the event’s occurrence rises, and the price of the shares that bet on the event’s non-occurrence falls proportionally. If the relevant event occurs and the user has purchased a share targeting that outcome, they receive a predefined payout. The question arises as to whether these contracts constitute bets or financial instruments, and whether such a model is even feasible in Germany.

                  Are prediction Markets Gambling or Financial Instruments?

                  In Germany, online gambling is generally regulated by the 2021 State Treaty on Gambling and is largely supervised and monitored by the Joint Gambling Authority of the German States (GGL). Financial instruments, on the other hand, are regulated both by European regulations and directives—most notably the Markets in Financial Instruments Directive 2 (MiFID II)—and by German laws such as the Securities Trading Act (WpHG). In Germany, financial instruments and compliance with the relevant regulations are supervised by the Federal Financial Supervisory Authority (BaFin). To date, BaFin has not yet taken an explicit position on the topic of prediction markets and the legal nature of the shares offered. The GGL, however, has. In a blog post dated September 5, 2025, on its website, it issued a strong warning against participating in so-called social betting on prediction markets. According to the GGL, these social bets—which relate to events in public or social life, such as political elections, court rulings, natural disasters, social events, or other non-sporting developments, are not eligible for licensing in the Federal Republic of Germany under the State Treaty on Gambling 2021 due to the high risk of manipulation associated with them and are therefore, in the GGL’s view, illegal gambling.

                  Does this Mean that Prediction Markets Cannot Be Operated Legally in Germany?

                  Against this backdrop, and particularly in light of the GGL’s statement, one is left with the impression that operating a prediction market platform and participating in or purchasing shares on such a platform is not legally permissible in Germany. However, it seems questionable whether this initial impression is actually accurate. A careful reading of the GGL’s statement reveals that the authority explicitly refers only to “non-sporting events.” The GGL therefore does not address sporting events that are the subject of a contract purchased on a prediction market. In fact, the State Treaty on Gambling expressly provides for the permissibility of betting on defined sporting events with verifiable results and clear rules. Operators could therefore apply to the GGL for a license to organize and/or facilitate sports betting and for inclusion on the so-called whitelist. However, the GGL would have no jurisdiction at all if the social bets and contracts on a prediction market were not gambling but rather financial instruments. The assertion that the operation of a prediction market is not eligible for authorization under the State Treaty on Gambling would then be irrelevant to the regulatory assessment of the platform’s operations. Against this backdrop, it would be conceivable to structure the contracts or share certificates, where possible, as, for example, financial futures or derivatives. The offering of such products is, in principle, legally permissible in Germany provided the relevant authorizations from BaFin are obtained. When planning such business models, it is essential to consider not only the licensing requirements but also any relevant general rulings by BaFin and its general administrative practices regarding the compliance obligations of financial firms. Whether a prediction market platform can ultimately be operated legally in Germany therefore depends heavily on the thoroughness of the business planning and the circumstances of the individual case.

                  Rechtsanwalt Dr. Lutz Auffenberg, LL.M. (London)

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                    Mar 23, 2026

                    Raising Capital Through Securities Issuances – What Are the Options, and What Should Be Considered?

                    For many companies, raising funds on the capital market can be an attractive alternative to traditional bank loans. The advantages of raising capital through the issuance of securities lie, on the one hand, in the fact that issuers can determine the terms of the issuance themselves, such as maturity, interest rates, repayment terms, and so on. On the other hand, the funds raised through a securities issue do not necessarily have to be secured by the issuer. However, this last point in particular is usually a prerequisite for a bank to grant a loan in the case of traditional bank loans. Of course, the issuance of securities in the EU and in Germany is strictly regulated, not least for the sake of investor protection. For this reason, issuers must also fulfill various documentation requirements when issuing securities. At the European level, the fundamental regulatory framework for this is provided by Regulation (EU) 2017/1129, also known as the Prospectus Regulation. At the national level in Germany, this is supplemented by the Securities Prospectus Act (WpPG). But when exactly must an issuer prepare a securities prospectus, and are there any exceptions to this rule?

                    A Securities Prospectus is the Standard

                    The Prospectus Regulation stipulates that securities may only be publicly offered in the European Union following the prior publication of a prospectus approved by the competent authority. Depending on the type of prospectus being prepared—the Prospectus Regulation distinguishes between various types of prospectuses, such as  e.g. the EU Growth Issuance Prospectus, the EU Follow-on Prospectus and the Base Prospectus—the effort involved in preparing each type varies significantly. For example, the maximum number of pages an EU follow-on prospectus may have is 50 DIN A4 pages in printed form. In contrast, for an EU Growth Prospectus, the permissible maximum number of pages is 75 DIN A4 pages in printed form. Generally speaking, the preparation of a securities prospectus requires a significant amount of resources from the preparer. Nevertheless, the preparation, approval, and publication of a securities prospectus can be worthwhile simply because a public offering of securities via such a prospectus also includes the possibility of conducting the offering in EU countries other than the one that approved the prospectus, following prior notification of the prospectus. In addition, the Prospectus Regulation itself provides for exceptions under which a prospectus need not be prepared.

                    Are the Exceptions to the Prospectus Requirement?

                    The Prospectus Regulation itself provides that it does not apply to certain types of securities. For example, units in closed-end investment funds, as well as securities that are unconditionally and irrevocably guaranteed by a Member State or a local authority of a Member State, are already excluded from the scope of the Regulation. Accordingly, no securities prospectus needs to be prepared for these. Furthermore, the Prospectus Regulation provides that public offerings of securities do not require a previously published and approved securities prospectus if the offering is directed, for example, exclusively at qualified investors or at a maximum of 149 non-qualified investors per Member State. The same applies to offers where the minimum subscription amount or the denomination of the securities is at least EUR 100,000. In addition, the Regulation provides for an exemption from the obligation to publish a prospectus for issuers of securities, provided that the total value of the securities offered in the EU over a 12-month period does not exceed 8 million euros and the Member State in which the issuance takes place has adopted such a threshold. Germany has set the cap at 8 million euros. The current cap of 8 million euros will be raised to 12 million euros in the Prospectus Regulation by the EU Listing Act on June 5, 2026. For such offerings, however, the Securities Prospectus Act currently still stipulates that, for amounts up to a maximum of 8 million euros, issuers must either prepare a securities information sheet (WIB) comprising a maximum of four DIN A4 pages, have it approved by BaFin, and publish it, or that issuers must prepare and publish a Key Information Document (KID) in accordance with the PRIIPs Regulation. Such a Key Information Document does not require approval by the competent supervisory authority. Which documentation must be prepared depends on how the securities being offered are structured. A security that meets the requirements of a “packaged investment product” under the PRIIPs Regulation may only be publicly offered after the publication of a KID. Other securities may only be publicly offered after the preparation, approval, and publication of a WIB.

                    Attorney Dr. Lutz Auffenberg, LL.M. (London)

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                      Mar 16, 2026

                      The Crypto Asset White Paper – What Are BaFin’s Powers Regarding Token Offerings?

                      Anyone seeking to offer crypto assets to the public in the European Union must first prepare and publish a crypto asset white paper in accordance with MiCAR regulations. The document must provide detailed information about the token offering. Specifically, Article 6(1) of MiCAR requires that the document include, in particular, information about the provider or—if different—the issuer of the crypto assets, the project behind the crypto assets, the details of the public offering, the rights and obligations associated with the tokens, as well as the risks, technical functioning, and potential adverse effects on the climate or the environment must be presented in the crypto asset white paper. Particularly attractive to initiators of crypto projects is the fact that MiCAR does not require approval of the crypto asset white paper by the competent supervisory authority, which in Germany is BaFin. Under Art. 8(1) MiCAR, the only requirement is that the offeror or issuer submit the final crypto asset white paper to the competent authority. Art. 8(3) MiCAR clarifies in this context that the supervisory authority may not require approval of the document prior to publication. The submission must take place 20 business days prior to the date of publication of the white paper.

                      What Specifically is BaFin’s Role in Relation to Crypto Asset Whitepapers?

                      At first glance, BaFin’s role regarding crypto asset white papers under MiCAR appears straightforward. BaFin is merely required to forward the crypto asset white paper submitted by the issuer to ESMA within five business days, after which ESMA makes it available in its crypto vasset white paper registry starting on the date the public offering begins. The submission to ESMA must take place within five business days of receiving the white paper. In addition, BaFin is tasked with forwarding, also within five days, the list of Member States—to be provided by the issuer—in which the public offering of the crypto assets is to take place, to the central contact point of the host Member States. In addition to the crypto asset whitepaper, BaFin, as the competent authority of ESMA, must also submit the explanation regarding the legal nature of the crypto assets to be offered, which must be drafted by the issuer and must explain why the crypto asset does not qualify as an e-money token (EMT) or an asset-referenced token (ART). However, Article 8 of MiCAR does not explicitly grant any substantive review authority in any form. Nevertheless, Article 94(1) of MiCAR sets forth certain powers vested in the competent authorities, and thus also in BaFin. The German legislature has specified these powers in Section 16 of the Crypto Markets Supervision Act (KMAG).

                      What Regulatory Instruments Does BaFin Have at Its Disposal Regarding Crypto Assets White Papers?

                      Art. 94(i) of MiCAR stipulates that competent authorities must have the power to require the persons responsible for a crypto white paper to amend or supplement the document if it does not contain the content required under MiCAR. BaFin may also require amendments to the white paper if this is required for reasons of financial stability or the protection of crypto asset owners. Furthermore, as the competent authority, BaFin has the option to suspend the public offering of crypto assets for up to 30 business days if there is suspicion that provisions of MiCAR have been violated. BaFin’s most stringent supervisory measure is the ability to prohibit a public offering of crypto assets if violations of MiCAR have been identified or if there is a sufficiently well-founded suspicion that such a violation will occur. In accordance with general principles of administrative law, BaFin must always act proportionately when exercising these powers. The German legislature has implemented the suspension and prohibition of public offerings of crypto assets in Section 15 of the KMAG. The authority to require changes to the crypto asset white paper was granted to BaFin under Section 16 of the KMAG.

                      Attorney Dr. Lutz Auffenberg, LL.M. (London)

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                        Mar 09, 2026

                        The Listing Act – What is Changing for Smaller Securities Issuances in European Prospectus Law?

                        Regulation (EU) 2024/2809, also known as the Listing Act, was adopted on October 23, 2024, and largely entered into force on December 4, 2024. The Listing Act provides for far-reaching changes to various EU legal acts concerning the European capital market. The aim of the changes is to increase the attractiveness of the capital market in Europe and to significantly simplify capital raising for small and medium-sized enterprises via the local capital markets. This objective has been a perennial issue in European legislation, but unfortunately it has not yet been implemented with sufficient effectiveness through the various measures that have been implemented, most notably the so-called Capital Markets Union. In order to achieve a sustainable strengthening of the European capital market this time, the Listing Act provides for changes not only to the Market Abuse Regulation (MAR), MiFID2, and MiFIR. According to the provisions of the Listing Act, comprehensive changes are also to be made to the Prospectus Regulation, which will be particularly attractive for small and medium-sized enterprises. Some of these changes to prospectus law are already in effect, while others will only apply and take legal effect from June 5, 2026. Issuers and providers of smaller securities issuances should therefore be aware of the upcoming changes and check whether they could result in attractive financing opportunities for them.

                        The EU Growth Issuance Prospectus and the EU Follow-on Prospectus

                        Regulations governing the new EU growth issuance prospectus and the EU follow-on prospectus have been in force since March 5, 2026. The EU follow-on prospectus can be used by issuers and offerors for public offers of securities and their admission to trading on a regulated market that have been admitted to trading on a regulated market or an SME growth market for at least 18 months without interruption. The form of the EU follow-on prospectus is standardized and may not exceed a maximum of 50 A4 pages in printed form. In addition, it must be written in a comprehensible manner and in a legible font size. The EU growth issuance prospectus may be issued by issuers that qualify as SMEs, as well as by issuers that do not qualify as SMEs, provided that their securities are admitted to trading on an SME growth market or are to be admitted to trading on such a market. In addition, unlisted companies planning an emission with a total countervalue for the publicly offered securities of up to EUR 50 million may also use the EU Growth Prospectus, provided that they did not exceed an average number of 499 employees in the last financial year. Total countervalue must be based on the last 12 months. The EU Growth Prospectus is also a standardized document that must be written in a comprehensible manner and in a legible font size. The maximum number of pages allowed for this prospectus is 75 A4 pages in printed form, which means it can be slightly more comprehensive than the EU Follow-on Prospectus.

                        What Changes Will the Listing Act Bring for Small Issuances of Up to EUR 12 Million?

                        Previously, the Prospectus Regulation provided for the possibility of an exemption from the obligation to publish a prospectus for issuers of securities, provided that the total consideration of the securities offering in the European Union did not exceed EUR 8 million over a period of 12 months and the Member State concerned, in which the issue was to take place, had decided on such a maximum limit. Germany had set the maximum limit at EUR 8 million, while numerous other member states only allowed exemptions for smaller issue volumes. For public offerings up to a value of EUR 8 million, the German Securities Prospectus Act has since required either the preparation of a securities information sheet consisting of 3 or 4 A4 pages or the preparation of a key information document (PRIIPs KID) in accordance with the PRIIPs Regulation. From June 5, 2026, the Prospectus Regulation, as amended by the EU Listing Act, will provide that public offers of securities with a total value of up to EUR 12 million in the Union will be exempt from the obligation to publish a prospectus. However, the respective member states may decide to lower this threshold to EUR 5 million. This increased threshold will thus enable smaller companies to raise significantly more capital than before without having to prepare, approve, and publish a securities prospectus. However, the obligation to prepare a securities information sheet will continue to apply in Germany.

                        Attorney Dr. Lutz Auffenberg, LL.M. (London)

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