diff --git a/compiler/src/dotty/tools/dotc/typer/Typer.scala b/compiler/src/dotty/tools/dotc/typer/Typer.scala
index b795ab296467..50b973983c83 100644
--- a/compiler/src/dotty/tools/dotc/typer/Typer.scala
+++ b/compiler/src/dotty/tools/dotc/typer/Typer.scala
@@ -1810,6 +1810,13 @@ class Typer extends Namer
       // check value class constraints
       checkDerivedValueClass(cls, body1)
 
+      val effectiveOwner = cls.owner.skipWeakOwner
+      if !cls.isRefinementClass
+         && !cls.isAllOf(PrivateLocal)
+         && effectiveOwner.is(Trait)
+         && !effectiveOwner.derivesFrom(defn.ObjectClass)
+        ctx.error(i"$cls cannot be defined in universal $effectiveOwner", cdef.sourcePos)
+
       // Temporarily set the typed class def as root tree so that we have at least some
       // information in the IDE in case we never reach `SetRootTree`.
       if (ctx.mode.is(Mode.Interactive) && ctx.settings.YretainTrees.value)
diff --git a/tests/neg/i7748.scala b/tests/neg/i7748.scala
new file mode 100644
index 000000000000..60574fbf6182
--- /dev/null
+++ b/tests/neg/i7748.scala
@@ -0,0 +1,11 @@
+trait A extends Any {
+    case class B() // error
+    val x = {
+      case class C() // error
+      1
+    }
+    def f = {
+      case class C() // ok
+      1
+    }
+}
\ No newline at end of file