Binary Options Legal Status Guide
But in some respects, binary options remain inaccessible — at least in certain jurisdictions. They exist in a murky legal area in many countries.
Not sure whether it is legal to trade binary options in your country or not? In this guide, we will go over the current legal status of binary options in major countries. Keep in mind that the legal status of binary options is changing rapidly around the globe, so this information will be updated on a routine basis.
Please keep in mind also that none of the information in this guide constitutes legal advice. We are not legal experts in any capacity, and if you choose to trade binary options or offer them to the public, you do so entirely at your own risk. We are not liable for any losses or legal consequences you may incur.
The information on this article was last updated on January 29, 2018.
Trading binary options is legal in Australia, though the Australian government does caution traders to be wary of
The relevant financial regulatory body in Australia is the Australian Securities & Investments Commission (ASIC). ASIC maintains a publication called “Money Smart,” where they have published a brief for consumers on binary options.
The article makes it quite clear that it is fully legal for Australian citizens to invest in binary options. The guide does state the following:
Make sure the binary option provider has an Australian financial services (AFS) licence or is authorised by an AFS licensee, regulated by ASIC. To see if a company holds an AFS licence, search ASIC’s Professional registers.
Apparently, this is a strong suggestion, rather than a legal stipulation, but just to be safe, you should probably follow ASIC’s recommendations.
Best Practice: Australia urges consumers to think twice before investing in binary options, but takes a relatively liberal stance toward them. You can legally trade binary options if you are an Australian citizen, but you should stick with those that are regulated by ASIC or have an AFS license.
This is a country where trading binary options is
Update: As of the start of 2018, the FSMA has reported that it has been receiving more and more complaints from consumers regarding binary options as well as other “financial products and services.” In total, 792 messages were received last year. This accounted for almost half of all the complaints which the FSMA received, and represents an increase in 45% versus the volume of complaints for 2016.
There won’t be any regulatory changes, since binary options are banned in Belgium already. But this does mean we shouldn’t expect the FSMA to reverse that decision anytime soon. It also has broad relevance to the increasing awareness of binary options scams around the world.
Best Practice: Binary options trading is banned in Belgium altogether. Do not trade binary options as a resident of Belgium.
The Canadian government is not fond of binary options. As such, there are a lot of restrictions in place for both brokers and traders. This is somewhat surprising considering how many Canadian binary options traders there are.
The main regulatory body in Canada in charge of handling binary options concerns is the Canadian Securities Administrators (CSA).
Back in 2015, CSA released an investor alert at the Ontario Securities Commission. If you click through, you will see that the article states that the CSA warned traders to “exercise caution when considering an investment in binary options.”
At the time that alert was published, it was evidently still legal to trade binary options as a Canadian citizen — even if doing so was disapproved of by the CSA.
Update: Another, more recent article from September 2017 states that “…there are no registered individuals or firms permitted to trade binary options products in Canada.”
So there are no
What is confusing about this is that the subject of the article in question is a ban, which the CSA has just put on advertising, offering, selling, or trading binary options shorter than 30 days.
Does this imply that it is still legal to trade
As of February 2018, there is more relevant news concerning binary options and Canadian regulators.
You may be aware that Facebook announced that it will no longer be running advertisements for binary options. Cryptocurrency and ICO products can no longer be promoted on FB either.
The social network made this decision in part because US and Canadian authorities urged the site to consider how ads for these products might increase the prevalence of financial fraud.
Now those same authorities are lasering in on Google, trying to convince the search giant to stop running ads for the same products.
Specifically, Jason Roy has commented on this action. Roy works as the chairman for the Binary Options Task Force in Canada, and is also a senior investigator for the Manitoba Securities Commission. According to Roy, “We’ve [the Binary Options Task Force and the FBI] been talking to Google and had similar discussions and are waiting for them to take similar action.”
It is unknown yet whether Google will decide to enact a ban like Facebook’s.
Best Practice: If you are a Canadian citizen, whatever you do, do not trade binary options shorter than 30 days in duration. You may also want to play it safe and wait for further statements from the CSA before you consider trading
In Cyprus, binary options brokers are regulated by the Cyprus Securities and Exchange Commission (CySEC). CySEC is notoriously loose about its regulatory criteria, which is why most binary options brokers seeking regulation choose to go through CySEC.
As a result, trading binary options in Cyprus is not a problem. CySEC would of course like you to go through their regulated brokers.
Update: In February 2017, it was announced that CySEC is thinking of making sweeping changes to how binary options are regulated in the country. The proposed changes would act to protect traders — including very useful reforms like forcing brokers to allow customers to leave trades at any time.
Head of CySEC Demetra Kalogerou has also been quoted as saying, “It will be more appropriate to suggest binary options only to professional traders” at iFX Expo International 2017. It was interpreted by some publications to imply that CySEC is thinking of banning binary options altogether. Her statement is actually quite vague though — so there is no reason to go into a
Update: In February 2018, CySEC imposed a new rule which stipulates that investment firms which offer binary options as well as other financial products to traders will need to get accountable regarding the countries where they operate.
Going forward, brokers will have to let CySEC know if they are offering their services to clients outside the European Union. They will also need to post all of the countries where they are operating on their websites for the public to see.
Additionally, CySEC wants to make sure that these brokers are operating legally throughout the world. As such, investment firms will need to be able to furnish certified copies of authorization issued to them by the regulators in those countries.
Best Practice: If you are a citizen of Cyprus, you can trade binary options. Try and stick with a regulated broker.
While this actually would not necessarily imply that allbinary options are banned, AMF also published an extensive list of unauthorized binary options brokers in 2015.
While the list certainly does not include every broker under the sun, it is clear that AMF tried to be very thorough when compiling it.
At the bottom of the list, AMF wrote:
Any unauthorised intermediaries [brokers] run the risk of criminal sanctions. If the intermediary in question is not on these lists, we strongly recommend that you do not respond to their offers.
Since that list was published, AMF has continued to print additional warnings with more binary options brokers identified.
So is binary options trading illegal in France? Not yet. However, it is certainly illegal for binary options brokers not regulated in Europe to offer services to French customers.
Best Practice: France seems pretty
Israel is a somewhat fascinating player in the binary options world. Binary options has become a huge industry in Tel Aviv. Thousands of people have relied on it for their income.
But that is all going away now. The problem is that Tel Aviv became binary options scam central. While the industry propped up the economy, it also robbed a lot of traders blind. So, the government decided to act.
In October 2017, Israel’s parliament passed a ban which prevents Israeli brokers from doing business with customers overseas. Serious penalties will be assessed against offenders, including potential imprisonment.
So, if you are Israeli, you cannot trade binary options. You also cannot sell them to customers domestically or abroad.
Updates: Are binary options really finished in Israel? Maybe, maybe not. Finance Magnates recently ran an article which includes an upload of a relevant Israel Supreme Court decision made in response to a petition.
This decision calls for the Knesset and the Israel Securities Authority (ISA) to essentially clarify why the ban is required, and whether it might not make more sense to consider regulating the industry instead of shutting it own.
There are around 4,700 employees working at 70 brokers in Israel, making it a major part of the country’s economy. When the ban goes into effect on January 26, 2018, it is going to cripple that segment of the economy, possibly with devastating ripple effects.
The Knesset and the Israel Securities Authority will need to respond to the court by January 10.
January 2018 Update: It is time to follow up on the update above. The Supreme Court of Israel has come to a decision, and unfortunately, it has been to reject the appeal. The ban on binary options went into effect on January 26.
Pini Peter, the owner of SpotOption, contends that it was not a “raid” as SpotOption was cooperating with the FBI. Apparently the matter concerned Lee Elbaz, an Israeli binary options executive who was arrested in September.
Right now it is impossible to say what the full implications of this “raid” are, but it is worth reporting the incident considering that SpotOption is a core company in the binary options industry. Any matter connected to SpotOption could feasibly impact the whole industry.
Best Practice: Do not trade binary options if you reside in Israel.
In Japan, the regulatory body which is responsible for addressing binary options is the Financial Futures Association of Japan (FFAJ).
Japan has not placed any sort of ban on binary options trading, though it does have a lengthy document stipulating the rules for
- Binary options trades should never be shorter than 2 hours in length.
- Pricing and payout information should be transparent.
- Clients should be assessed before they are offered services.
If you are a resident of Japan and you want to trade binary options, you should go over this document (FFAJ Guidelines for OTC Binary Options Transactions)
Best Practice: You may trade binary options in Japan, but you need to make sure that you are doing business only with companies which observe the guidelines set by the FFAJ.
The regulatory body you should familiarize yourself with in Malaysia is the Bank Negara Malaysia, which is the central bank of Malaysia.
The Bank Negara Malaysia seems to have very little to say regarding binary options at all. If you run a search on the official site, very little comes up.
Illegal Foreign Exchange Trading Scheme refers to the buying or selling of foreign currency by an individual or company in Malaysia with any person who is not a licensed onshore bank or any person who has not obtained the approval of Bank Negara Malaysia.
From this statement, it seems reasonable to assume that one should trade with caution in Malaysia, dealing only with licensed companies.
Best Practice: Before you trade binary options in Malaysia, run a search on the company you are thinking of using to see whether they have obtained the central bank’s approval.
Malta is a country which comes up pretty often in discussions concerning binary options regulation. This is because it is one of the few which actually offers a regulatory framework.
Originally, binary options in Malta were categorized as gaming products. But in 2013, the Malta Financial Services Authority (MFSA) announced that binary options would henceforth be categorized as investment products subject to Markets in Financial Instruments Directive, 2004/39/EC, (MiFID) rules.
Like CySEC in Cyprus, MFSA actually licenses binary options providers with the licensing criteria for assessing the applicants available publicly.
MFSA has also posted a notice to the general public about binary options, Forex, CFDs, and “other speculative products.” If you are trading with an
In this notice, MFSA simply underscores the high risk nature of these investment products. The notice concludes with the following advice:
The MFSA strongly advises investors and potential investors to exercise caution and be vigilant when seeking to invest in these speculative products and to ensure that the provider is duly authorised to offer services in relation to these products.
So, citizens of Malta may invest in binary options, but the MFSA would only like consumers to deal with regulated providers.
Best Practice: If you are a citizen of Malta, you can trade binary options. It is best to use a regulated broker.
The Netherlands is another country where binary options are essentially banned. The relevant announcement was made on September 16, 2016, by Minister of Finance Jeroen Dijsselbloem while taking questions from Parliament. Dijsselbloem said during the session that he would be partnering with the Netherlands Authority for the Financial Markets (AFM) to set up an advertising ban on binary options.
Merel van Vroonhoven, chair of the AFM Executive Board, stated:
We consider it very important to introduce an advertising ban on binary options and other toxic investment products. Advertising for these investments entices consumers with the prospect of earning money fast, but it is actually the case that you can easily lose all of the money you have put in.
This is pretty
Best Practice: Do not trade binary options in the Netherlands. This country is in the process of instituting an
Russia is a country that has taken scarcely any interest in binary options regulation to date. This is one of the reasons you may notice that a lot of brokers target Russian customers.
In theory, regulation of binary options trading in Russia would fall under the authority of the Central Bank of the Russian Federation.
Presently, the central bank comments on binary options, but has nothing to do with actual licensing or prosecution, domestically or with respect to foreign brokers.
As a result, binary options trading is something of a
Update: There have been reports (rumors) that Valery Lyakh, Head of the Department for Countering Malpractice at the Central Bank of Russia, has started to take an interest in binary options. Apparently, Lyakh is concerned about Russian citizens being scammed by brokers.
Also relevant is the article in the Financial One magazine. The article includes a number of quotes from Sergey Shvetsov, the first deputy chairman of the Russian central Bank. The article states that Shvetsov, “promised that in the near future, binary options and CFDs will be banned for sale to unqualified investors.”
So it is possible that the Bank of Russia will start looking into establishing a regulatory structure soon. We will keep you posted.
Best Practice: If you are a Russian citizen, you are free to trade binary options anywhere you want. Just make sure you do your homework and pick a trustworthy broker that is not going to scam you.
The relevant regulatory body in Singapore, when it comes to binary options, is the Monetary Authority of Singapore (MAS). On the whole, the MAS has been very lax about binary options.
Updates: In March of 2017, the MAS issued a warning to investors concerning binary options trading, specifically on platforms which are unregulated. This warning was released in response to complaints received by the MAS.
Best Practice: As advised by the MAS in the linked notice, Singapore citizens should only trade with binary options brokers that are regulated and listed in the MAS Financial Institutions Directory. Citizens should also avoid those which are listed in the MAS Investor Alert List.
In South Africa, the agency in charge of financial regulation is the Financial Services Board (FSB). From what is known at this point, the FSB is not particularly involved with binary options and does not currently regulate any binary options brokers.
The FSB usually concludes these warnings by reminding the public that one should always look up a broker with the FSB to check whether they are “authorized to render financial services.”
As such, it seems the FSB would prefer that traders in South Africa only do business with companies regulated by the FSB. But it can also be inferred from these specific blacklist warnings that the FSB has not instituted a complete ban on binary options trading.
Best Practice: The FSB’s position on binary options is extremely vague. It appears you can legally trade if you are a citizen of South Africa, but you should exercise caution.
In the United Kingdom, the Gambling Commission used to be in charge of regulating binary options brokers. This applied exclusively to brokers with remote gambling equipment located within Great Britain.
Under the Gambling Commission, consumers in Britain were able to use the services of domestic and overseas binary options sites.
That meant even brokers that were not regulated by the Gambling Commission could legally offer services to UK customers.
If you wish, you may still search the database of license holders over at the Gambling Commission. You may also still view the old Gambling Commission policies at the Gambling Commission’s guide to binary trading.
The FCA was given regulatory control over binary options trading in the UK in response to the MiFID II amendment.
The FCA also maintains a list of unauthorized binary options firms. The authority states:
All firms trading in binary options need to be authorized by us. Below is a list of firms without authorization that we understand are offering binary options trading to UK consumers.
This indicates that the FCA has reversed the previous policy. Now, regardless of location, all binary options companies must be regulated by the FCA for UK customers to use them.
This does not seem to imply that it is a crime for UK citizens to trade with unauthorized companies, but it does imply that it is a crime for these companies to operate in the UK without seeking the FCA’s approval.
The FCA’s list of unauthorized binary options firms is fully searchable, and includes both trade names and owner/operator names.
You also can search the FCA Register of Financial Services Firms. Companies listed in this database are authorized by the FCA, and are okay to trade with.
The FCA has also published a general informational page on binary options. Here, the FCA lays out its concerns about binary options in detail, and also provides more information on the tightening regulations.
Technically, none of this is necessarily “bad” news for consumers. Even though the FCA’s new rules mean that fewer binary options brokers are allowed to do business with UK customers, this does help keep scammers out of the market.
Additionally, consumers who do lose money unfairly may in some cases be able to access the Financial Services Compensation Scheme.
Best Practice: Before trading with any binary options broker as a UK citizen, make sure that they are authorized by the FCA. If they are not, it is best at this point not to do business with them. This is probably just the start of the FCA’s crackdown. Keep checking back for updates.
In the United States, the Commodity Futures Trading Commission (CFTC) is in charge of regulating futures, swaps, and other financial markets.
On binary options, CFTC says:
It is against the law to solicit U.S. persons to buy and sell commodity options, even if they are called ‘prediction’ contracts, unless they are listed for trading and traded on a
CFTC-registeredexchange or unless legally exempt.
It is difficult to interpret this, but it should be noted that the key word here may be “solicit.” Basically, it is against the law for brokers to deal with USA customers unless they are approved by the CFTC. The CFTC regularly penalizes companies that break this rule quite harshly.
The CFTC also maintains the Fraud Advisories page for consumers. The main idea of the advisory is summarized in the following paragraph:
Because of their lack of compliance with applicable laws, if you purchase binary options offered by persons or entities that are not registered with or subject to the oversight of a U.S. regulator, you may not have the full benefit of the safeguards of the federal securities and commodities laws that have been put in place to protect investors.
This does not actually state that trading with an unregulated broker is illegal. It essentially implies, “let the buyer beware.”
The CFTC does suggest that US traders take the following steps before trading binary options:
- See if the platform is registered with the SEC.
- Make sure the platform is an actual exchange.
- Find out whether the platform is a designated contract market.
- Use the BASIC database provided by the National Futures Association (NFA) as well as FINRA’s BrokerCheck to verify the status of a broker.
Right now, very few brokers are registered with the CFTC. The main one is the North American Derivatives Exchange (NADEX).
Updates: As of December 2017, the CFTC has added another 21 binary options sites to its RED List. This list is essentially the regulator’s blacklist; it is a list of brokers which the CFTC has identified as offering services to USA customers without registering first with the CFTC. There is no change in policy here, just a growing crackdown.
As an example of the CFTC’s commitment to go after offenders, recently there was a particularly
Best Practice: If you are a US resident, you are best off trading with a broker which is operating legally. That means a
Get Ready for MiFID II
A massive sweeping change is coming to the financial markets in Europe as of January 3, 2018, and that is the introduction of MiFID II.
In case you are not familiar with MiFID, it stands for “Markets in Financial Instruments Directive.” MiFID went into effect in 2007, and applies across the entire European Union. It is a regulatory framework which helps to reduce abuses in European financial markets while setting authorization requirements and boosting transparency.
MiFID II is a revision to the original MiFID, and will seek to provide even more transparency in the markets.
The impact that this new regulatory framework will have on the binary options industry will doubtless be complex. Actually, some of those changes have already taken place. You may have noticed for example that a lot of binary options brokers have thrown out match deposit bonuses with high turnover requirements. This is in response to MiFID II rules.
Basically, compliant brokers are no longer allowed to tie up your withdrawals through bonus programs. And that is a good thing.
For that reason, you should not be alarmed by the implementation of new regulations throughout the European Union — or the tightening of binary options regulations elsewhere around the world. These changes are aimed at consumer protection and should ultimately play to your advantage as a trader.
December 2017: ESMA Takes Major Action Against Binary Options
A major blow to the binary options industry was struck this month when the European Securities and Markets Authority (ESMA) released an announcement wherein it was stated that they were thinking about banning binary options outright.
This news does not come as a surprise. There has been speculation throughout 2017 that the ESMA might be planning something like this.
Along with possibly banning binary options, the ESMA has announced that it plans to restrict leverage on Forex and CFD products.
January 2017: ESMA Opens Consultation on New Rules
Following up on the update above, the ESMA has opened a consultation on a set of new rules which they are proposing for CFDs, rolling spot Forex, and binary options.
In the ESMA press release, the regulator states the following concerning binary options:
The potential measure under consideration is a prohibition on the marketing, distribution or sale of binary options to retail investors.
In short, the ESMA has not reduced the scope of its proposed ban. Anyone who wishes to submit comments to the ESMA should do so now while the measure is under consideration.
Q: Can I get around my country’s ban on binary options?
A: It can be frustrating to find out you live in a country, which has completely banned binary options. This may make you wonder if you can just use a VPN to access an offshore broker and make a deposit.
While this may seem tempting, you should not do it. First of all, at some point (probably when you withdraw), the broker will require you to verify your identity. At that point, you will be unable to complete the process. You might lose your investment, and/or get banned from the platform.
Secondly, you could be reported to your country’s authorities, and might incur a penalty as a result.
Q: How do I know a regulator is legit?
A: Sometimes while you are researching binary options brokers, you might stumble across “regulators” that do not appear to have any financial authority. This may leave you feeling a little confused.
One example is the Financial Market Relations Regulation Center (FMRRC) in Russia. On first glance, this might sound like a real regulatory body. But if you look a bit closer, you will discover it is not one.
The FMRRC is an independent
To that end, the FMRRC has no legal authority. It is not a real regulator. It does offer oversight, but it is hardly unbiased, and the interests of brokers are the overriding concern, not the interests of consumers.
It is totally up to you if you want to take certifications like those offered by FMRRC seriously. Just remember that membership in an organization like this does not represent real regulatory status.
Real regulatory bodies are always either government entities or
Q: What if my country’s stance on binary options is unclear?
A: You should never take any chances. In a lot of countries, binary options exists in a legal gray area. If you are unsure if what you are doing is legal or not, always call the financial regulatory agency in your country and ask directly.
The Bottom Line
For now, trading binary options remains legal in most countries around the globe — with a lot of restrictions and caveats. In most countries, the smart move is to play it safe and use only regulated binary options brokers. If in doubt, always contact your country’s financial regulatory authority and ask questions before you engage in new investments. Good luck, follow your country’s laws, and stay safe.