Is Binary Options Fraud?

Is Binary Options Fraud?

Is binary options fraud? Or a legitimate form of income? The legality or not of the binary options market is a topic that generates a lot of emotion and discussion in the market.

There are those who argue that binary options as a legal way to profit from the financial markets, while there are others (like) who do not believe in the legality and validity of the binary options market.

Well, the truth is that there is no universal status regarding the legality of trading involving binary options globally, the way it is with other financial investment vehicles.

For example, stock trading is legal in all parts of the world, but there are some aspects of stock trading (such as short selling) that are allowed in some countries but prohibited in others.

With binary options, the situation is unique. There are countries where binary options are legal and classified as a financial market, while there are countries that classify binary options as a legal transaction but not a financial market transaction.

Then there are countries that consider binary options completely illegal and do not allow their citizens to participate in this trading. Let us now examine the different levels of status that is granted in the binary market.

Binary Options as a Legal Entity, but a Gaming Operation

There are countries that did not classify digital options like a financial market. In these areas, binary options are classified as a form of gambling, therefore not subject to regulation by the regulatory authorities in those countries.

Instead, what we have are oversight functions to be performed by gambling commissions, which do not exercise the same level of control over binary options traders as financial market regulators do.

Binary Options as a Legal Transaction in the Financial Market

Some countries have transitioned from the previous category to this category. In this category we have Japan, Malta and Cyprus.

The transition was brought about by the need to clean up the local market, as many market operators took advantage of the loopholes created by the classification of binary options as a gambling operation without financial regulation.

These market players actively promoted binary options as a form of financial investment, as the same assets are traded on truly regulated markets.

Without financial regulation, many breaches in the market began to occur until things got to a point where the integrity of the entire system was called into question.

That is why the affected countries took the decision to change the status of binary options, legal in the financial market, bringing it back under the regulatory surveillance of financial watchdogs.

As an Illegal Operation

Some countries have banned binary options trading altogether, and one example is the United States.

In the US, any form of 'online' gambling is prohibited and binary options which is not considered as trading on the financial market is therefore classified as a gambling operation.

However, trading options as offered by Nadex do not fall under the category of 'online' gambling, therefore it is considered legal by law.

Conclusion

To answer the question about the legality of binary options as a trading entity will depend on which part of the world you are from. If you live in the United States, then you are better served trading with Nadex, or over the brokers that trade binary options on ETFs listed on CBOE and AMEX.

If you are in other parts of the world, trading with brokers that are located in countries that classify binary options as a legal transaction in the financial market.

The danger is not whether binary options are considered legal or not, but whether there is protection for the client in case of financial calamities. You can enter countries where binary options are legal but classified as a gambling operation.

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