Whether binary options are legal depends on the country, territory, or jurisdiction you are from. That means trading of binary options is legal in some countries, while illegal in others, depending on their definition, laws, and regulations.
Trading is typically not legal in countries where either:
i) there are no licensed and regulated brokers, or
ii) binary options are considered gambling products.
Some countries have also banned marketing binary options because they’re regarded as fixed-odds products. In this respect, it’s no different from sports betting.
Countries in the EU are a textbook example of where marketing and trading binary options are illegal. Aussies aren’t allowed to trade binary products, too. Meanwhile, binary options are primarily legal in North American countries (read: Canada and US). Japan and China lead the way for Asian countries.
Some countries had initially legalized binary options. However, they quickly banned them as a result of rampant binary options scams and fraud linked to the sector. Israel is a classic example, with Israel Securities Authority (ISA) banning the sale of binary options in 2017. Gray areas also exist because some countries don’t have express laws and legislation either banning or legalizing binary options.
Countries where Trading Binary Options is Legal
A number of countries (mostly in North America and Asia Pacific) have legalized binary options trading and marketing. One notable thing these countries have in common is that the brokers are duly licensed and regulated. They also regard binary options (just like FOREX or CDOs) as a legit investment vehicle.
Here are typical examples of countries where binary options are legal:
1. United States
Binary options are legal in the USA only if they are traded on a regulated exchange in the U.S. The North American Derivatives Exchange, Inc. (NADEX), Chicago Mercantile Exchange, Inc. (CME Group), and the Cantor Futures Exchange LP (CX Futures Exchange) are the only 3 Designated Contract Markets (DCMs) that offer regulated and legal trading of binary options in the U.S. These designated contracts markets are registered and regulated by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
As far as regulation of binary options goes, the US market is the gold standard for the rest of the world. After all, you’ve to pass the high standards set by the CFTC if you trade or exchange options, stocks, and financial securities. As if that isn’t strict enough, you must also answer to the SEC which is responsible for overseeing futures and options markets.
Make sure that your broker has a valid license from both the SEC and CFTC before you trade. The regulatory agencies can ban any binary options broker or suspend its license if it breaks the imposed regulations and rules.
As of writing, no binary options provider or broker located outside of the US has received a valid license from either agency. That means overseas providers that claim to cater to the US market are unregulated and thus illegal. In fact, unregulated brokers and providers located abroad have tainted the US binary options market.
You may have heard that these unregulated binary options platforms are involved in a variety of nasty fraudulent activities, including:
- Not reimbursing customers’ money
- Refusing to credit customers’ accounts when they win a trade or deposit funds
- Identity theft
- Manipulating trading software to generate losing trades
CFTC has dropped the sledge hammer on a few binary options brokers that operate illegally in the US. It has also sent out multiple warnings to retail traders and investors about these scams and frauds associated with overseas binary options providers.
Japan is one of the few Asia Pacific countries that have fully legalized binary options. However, the binary options trading provider must be regulated and licensed. Two agencies regulate binary options industry in Japan.
- Financial Services Agency (FSA) – The FSA keeps tabs on the whole financial system in Japan. That means it’s in charge of the insurance, banking, and accounting sectors. More importantly, all binary options providers must obey FSA regulations and rules.
- Securities and Exchange Surveillance Commission (SESC) – The SESC is a commission that operates under the authority of the FSA. It is the closest thing you can get to SEC in Japan. All binary options trading platforms answer to SESC.
Binary options are legal in Japan and they can be traded only according to the regulations and rules of the Financial Futures Association of Japan (FFAJ). Trading of binary options with contracts shorter than 2 hours is not allowed in Japan.
3. Australia – Are binary options legal in Australia?
Binary options are considered OTC derivatives in Australia. That makes the Australian Securities and Investments Commissions (ASIC) the primary regulator of the industry. Unfortunately, ASIC has banned binary options at least until October 2031, making their sale and distribution illegal in the Australian market.
The ban of binary options trading came to force in mid-2021. ASIC made this decision to cushion Australian retailors against bad actors in the market. There were simply too many binary option scams happening on a daily basis. Note that the ban doesn’t apply to professional binary options traders.
Binary options trading is legal in Germany if conducted through a regulated broker within the European Union. However, the German Federal Financial Supervisory Authority (BaFin) has banned the sale, distribution, and marketing of binary options to retail customers within the country.
Binary options are legal in France. But it is illegal to market or advertise binary options from within France or to French citizens. That is the big caveat.
Lack of regulation is the biggest pain for traders and investors. As a customer, your money is not absolutely safe because the market is not regulated. Investors might go bankrupt due to scams and problems with brokers.
Although not regulated, binary options are 100% legal in Denmark. As with most EU countries, binary options trading platforms may not market or advertise their products directly to Danish citizens.
7. New Zealand
Binary options are legal in New Zealand and traded as per the regulations of the Financial Markets Authority (FMA). The regulator has written a comprehensive warning to investors about the risks associated with binary options trading. Unlike ASIC, FMA has not issued a ban for retail clients.
Trading of binary options is legal in Malta. It’s regulated by the Financial Instruments Directive (MiFID). Malta is one step ahead of the rest of European union when it comes to regulation. For example, all brokers offering binary options in Malta must put down at least €730,000 to get a trading license from MiFiD. They must also adhere to a long list of off-site and onsite regulations.
Binary options are legal to trade for both brokers and investors in China.
There are no specific laws or regulations banning or legalizing binary options in Brazil. Popular binary options traders & brokers like Binomo, IQ Option, ExpertOption and Pocket Option are legally operating in the South American country.
Countries where Trading Binary Options is Legal
The following countries have banned binary options:
Canada: The Canadian government has made it illegal for binary options brokers to offer their services inside of the nation. However, brokerages from overseas can offer binary options trading to Canadians.
United Kingdom: The marketing, distribution, and sale of binary options are illegal in the UK. They are regarded as a form of fixed-odds betting and thus banned.
Cyprus: The government of Cyprus banned the marketing, distribution and sale of Binary Options in 2019. It’s especially illegal to Cyprus retail investors and citizens.
Indonesia: Binary options are not legal in Indonesia because they are considered a form of online gambling by the Commodity Futures Trading Regulatory Agency.
Israel: Trading of binary options has been illegal in Israel since 2016. They were banned by the Israel Securities Authority saying trading binary options is a form of gambling and not an actual investment vehicle.
Belgium: The government of Belgium made binary options trading illegal in 2016 on the grounds of rampant fraud.
European Union: The European Securities and Markets Authority banned the sale, distribution, and marketing of binary options to retail customers in the EU bloc in 2018. The ban is temporary, although binary options are still legal in some constituent countries like Denmark.
Are binary options gambling?
Yes, binary options are considered a form of gambling in most countries. Trading of binary options is not taken as investing since the brokers or traders have an advantage over the investors. That means binary options have a negative cumulative payout for the investor, making them feel like gambling on slot machines in which the casino has an edge over the player.
For example, in the UK, the FCA bundles binary options together with fixed-odds products like sports betting.
The regulator gave this as the reason for banning the sale and marketing of binary options in the country.
Binary options are not like investments such as stocks, securities, and bonds, which require heavy knowledge of the markets and the products. Trading of binary options requires little or no market knowledge, so it is essentially gambling rather than investing.
Is binary trading legal in japan?
The answer is a big yes – binary trading is legal in Japan. Japan is at the forefront of binary options trading in Asia Pacific. The market has matured and regulators (read: FSA and SESC) are on top of their game. What makes Japanese market unique is that that binary trading is illegal if the option contract expires in less than 2 hours.
The vast majority of short-contract options cannot be legally traded in Japan. We are talking about contracts that expire in 30 seconds up to 1 hour. It’s no surprise that long-term binary options trading is highly popular in Japan.
Is binary trading legal?
Binary trading is legal in some countries and banned in others. For instance, binary options trading is legal in the United States as long as it is done on a registered US binary options exchange. Therefore, trading binary options on an overseas exchange is not legal in the US.
The same is true in Japan, China, New Zealand, Australia, Malta, and South Korea – just to mention a few countries where binary trading is legal. In the vast majority of these countries, binary option trading is legal only on registered and regulated exchanges and through licensed brokers.
Other countries where binary trading is legal include:
- New Zealand
- Saudi Arabia
- South Africa
Meanwhile, binary trading is completely banned in countries like Israel, Indonesia, and Belgium based on varying reasons, ranging from being considered a form of online gambling to widespread fraud. Other examples of countries in which binary trading is illegal include:
- North Korea
Who regulates binary?
In regulated markets, each country has one or several agencies that regulate binary options. Most countries in the gray area have no one to regulate the market. You might be interested to know the major binary regulators across the world.
United States: U.S. Securities and Exchange Commission (SEC), the Chicago Board Options Exchange, and the Commodity Futures Trading Commission (CFTC) are the three key regulators of binary options trading in the USA.
Japan: Financial Futures Association of Japan (FFAJ) is the primary regulator of binary options trading in Japan.
China: Binary trading in the country is regulated by China Securities Regulatory Commission (CSRC)
European Union: The EU body responsible for binary trading is The European Securities and Markets Authority (ESMA).
United Kingdom: Binary trading in the UK is regulated by several agencies, including the Financial Conduct Authority (FCA).
Australia – As mentioned, ASIC is the sole Australian agency responsible for overseeing binary options.
Why is binary options banned in US?
Binary options are not banned in US. Trading binary is legal in the country if you meet one condition: trade at a US exchange. As it happens, there are only three regulated binary options exchanges in the United States. NADEX is the biggest and most popular binary exchange (by trading volume) in America. The other two are Chicago Mercantile Exchange, Inc. (CME Group), and the Cantor Futures Exchange LP.
How legit is binary options?
Binary options are mostly legit in countries that have regulated them. Here think United States, Japan, and Malta. These countries have regulatory agencies and regulations in place. That means only licensed and regulated brokers and platforms are allowed to do business. This helps lock out scammers and shoddy trading platforms, so that you can trade with extra peace of mind.
On the other hand, binary options are fixed-odds products. They are not far different from betting on horse racing or sports. In this respect, binary options are form of gambling, which makes them somewhat illegitimate on the investment markets. Most countries like the UK and Australia have cited this reason for banning selling of binary options to direct consumers.
Has anyone made money from binary options?
Yes, some people have made money (in fact, decent living) from binary options trading. Traders of varying experiences and skill levels have earned decent money from binary. However, studies have shown that no more than a third of traders make money, while the rest end up losing their trades. What’s more, those who manage to eke out something only make small amounts and not large sums of money.
How to Make Good Money from Binary Options
Getting consistent returns from trading binary options is easier said than done. Making steady earning in the binary options industry requires a great deal of perseverance, attention to detail, and effort. You can also use some tips to rev up your earnings.
Go back to the basics – You must learn the ABCs of binary options trading before you plunk down your hard-earned dollars. Learn the ins and outs of risk management, trading tactics, and much more. The more knowledgeable you are, the better you will get at trading.
Research techniques for acing binary trading – Many binary options trading techniques exist, but not all deliver good returns. You need to do your homework to decide which works best for you. The Pinocchio strategy is a no-brainer choice for beginners. Meanwhile, veteran traders will find the candlestick pattern strategy more their speed.
Choose the right underlying assets – You have to do thorough research before you choose an underlying asset that works great for you. As a beginner, it pays to choose volatile assets that are a cinch to trade. We are talking about oil, gold, USD/EUR, and JPY/USD.
Test and refine your trading strategy – Make use of practice or demo accounts to sharpen your trading strategies. If something doesn’t seem to work, go back to the drawing board and fine-tune your plan and strategy.
Manage risk wisely – This one is a no-brainer. Trading binary options is a highly risky affair. As such, you should always stick to proven strategies for managing your funds and risk. Trade only money you can afford to lose.
Is binary option Risky?
Yes, binary option is risky. Remember, if you lose a trade, you will end up losing all the money you put into it. As market tools evolve, binary options will continue to become riskier and riskier. Therefore, it pays to stick to tried-and-true risk-management guidelines. For instance, you should never trade with money you cannot afford to lose. Most traders recommend putting no more than 20% of your bankroll into a single trade.