A classic binary option is an all-or-nothing way to speculate on a yes/no proposition at a fixed time. You buy a contract that will settle at a fixed payout (for example 90% profit) if the event happens and settle at full loss of entire stake if it does not. For many, that simplicity is the product’s main selling point. You know the possible gain and possible loss at the moment you enter, and there is no sliding scale.
In the United States, the product is tightly confined to exchange venues and a narrow set of contract designs. Most of the adds for binary options that you encounter online come from entities that can not legally sell binary options to traders in the United States. Some of these entities still do, and it can be difficult for the U.S. authorities to get to them because they are not based within the United States. Typically, they are registered in lax offshore havens in other parts of the world.
Inside the United States, the only permitted form of binary option is the exchange-traded and transparent one, and it is strictly regulated by the Commodity Futures Trading Commission (CFTC) or Securities and Exchange Commission (SEC) depending on the underlying asset. For retail binary options, only the CFTC can grant permission.
Regulation
Binary-style contracts that are offered to U.S. retail customers must be listed and traded on regulated exchanges or approved platforms. Some specific non-retail traders can access legal off-exchange binary-style contracts, but still only under narrow conditions.
The practical consequence is simple: if you’re a U.S. retail trader, stick to exchange-listed binary contracts or you will be dealing with entities that are knowingly breaking U.S. law by selling binary options to you. If they are willing to break these laws, what is stopping them from breaking the trader protection rules as well? And what recourse will you have if something goes wrong, after you have put your trust in a company that is deliberately based in a jurisdiction where U.S. authorities can not get to it?
U.S. regulators have repeatedly warned that the bulk of consumer harm in binary options comes from off-exchange platforms that manipulate prices, refuse withdrawals, or misrepresent payout mechanics. The CFTC and SEC have both issued investor alerts and taken enforcement actions against platforms that sell binary options to U.S traders. When binary options are traded on approved exchanges within the U.S, the legal framework protects market integrity, and clearing and settlement, and also gives both professional and retail traders legal avenues for redress.
Who can legally sell binaries to U.S. retail traders?
At the time of writing, only two exchanges have the required CFTC permission: the North American Derivatives Exchange, Inc. (Nadex) and the Chicago Mercantile Exchange, Inc. (CME).
The North American Derivatives Exchange, Inc. (Nadex) operates a CFTC-regulated designated contract market (DCM) and derivatives clearing organization (DCO). It offers retail traders exchange-traded binary options on forex, indices, commodities, and other underlying markets. Nadex is the most widely used legally approved platform for U.S. retail binary options trading.
The Chicago Mercantile Exchange, Inc. (CME) is a CFTC-regulated designated contract market that has received specific no-action relief and approval to list standardized binary-style “event contracts”. These satisfy regulatory requirements to be tradeable with U.S. customers when offered through an approved exchange structure. The CME event contracts are not marketed as binary options, but they are appealing to many traders who like classic binary options.
While both Nadex and the CME operate under CFTC oversight, their roles are different. Nadex is explicitly designed for retail traders and offers small-notional, short-duration contracts with fixed maximum risk and reward. CME, by contrast, integrates binary-style and event contracts into a much larger institutional-grade derivatives ecosystem, with higher notional values, professional trading infrastructure, and broker-mediated access. CME does offer binary-style and event-based contracts, but they exist alongside and are overshadowed by its massive futures and options markets. These contracts are not designed as a primary retail binary options venue. For U.S. retail traders seeking straightforward, retail-oriented binary options, Nadex remains the most direct platform, while CME’s binary-style and event contracts are better understood as part of a broader, institutional derivatives framework.
Nadex
Nadex (North American Derivatives Exchange) is a CFTC-regulated designated contract market (DCM) and derivatives clearing organization (DCO) headquartered in Chicago. As such, it is an exchange where retail traders in the U.S. can legally trade exchange-listed binary options and other limited-risk derivative contracts under U.S. commodities law.
Nadex’s binary options are short-term contracts where the outcome is a simple “yes/no” proposition on whether an underlying market will be above (or below) a specified level at a specified time. At expiration, each contract settles at either a fixed maximum (for example, 100) or 0. The risk for a buyer is limited to the amount paid for the contract, and the profit is predefined.
Retail traders can open accounts directly with the exchange. All contracts are fully collateralized and Nadex does not act as a counterparty to trades like many offshore binary options companies do. Instead, the exchange matches buyers and sellers on a transparent order book.
Nadex binary option contracts are available for a variety of underlying markets. Below are the main categories and examples:
- Forex (Foreign Exchange)
Nadex offers binary options based on major currency pairs such as EUR/USD, GBP/USD, and USD/JPY. These allow you to speculate on whether the exchange rate will be above or below a certain level at a given time. - Futures contracts for stock indices
Nadex binaries are based on index futures for major global equity benchmarks. Examples include the S&P 500 (US 500), Dow Jones (Wall Street 30), Nasdaq 100 (US Tech 100), Russell 2000 (US SmallCap 2000), and international indices like Japan 225 (Nikkei). It is important to understand that Nadex lists binary contracts where the underlying market is the futures contract for a major stock index. Traders are betting on whether the index future’s price will be above or below a strike at contract expiry, not directly on the index. This approach keeps the product within the Commodity Exchange Act framework and under CFTC jurisdiction, making it suitable for retail trading. - Physical commodities
These are based on futures contracts prices for physical commodities. Popular commodities in Nadex binaries include Gold, Silver, Crude Oil, and Natural Gas, all tied to futures contracts on regulated markets. Example: When Nadex lists binary options on crude oil, the underlying market is NYMEX crude oil futures based on the price of West Texas Intermediate (WTI) light, sweet crude oil. - Economic and market events
Nadex also lists “event style” contracts tied to outcomes of scheduled economic indicators or policy decisions, such as Federal Reserve interest rate decisions or job reports (e.g., nonfarm payrolls). These contracts settle based on specific values that are publicly reported at set times.
In addition to classic binary options, Nadex offers a few limited-risk derivative structures that appeal to retail traders because they also have predefined upside/downside. Call Spreads are contracts where profit/loss vary based on the degree to which an underlying market moves within a price range. Knock-Out / Touch Bracket Contracts have built-in upper and lower boundaries (a “floor” and “ceiling”), and positions are automatically closed if prices hit either boundary.
CME
CME Group (which includes the Chicago Mercantile Exchange, Chicago Board of Trade, NYMEX, and COMEX) is the largest derivatives exchange group in the world and operates multiple CFTC-regulated designated contract markets (DCMs) and clearinghouses. CME’s core business is listing and clearing futures and options on futures across nearly every major asset class. Unlike Nadex, CME is not primarily a retail-focused binary options platform, but it does offer binary-style and event-based contracts within its regulated derivatives framework, alongside a very broad set of more traditional products.
CME does not market a standalone “retail binary options” product in the way Nadex does. Instead, its binary-style offerings typically take the form of exchange-listed, standardized contracts with fixed or capped outcomes, usually referred to as event contracts. These contracts are fully margined, centrally cleared by CME Clearing, and traded on regulated CME exchanges under CFTC oversight.
CME’s event contracts are usually tied to economically meaningful reference prices or outcomes, such as whether a futures contract settles above or below a certain level, or whether a defined economic event occurs. While these contracts are legally accessible to retail traders through brokers, they are generally used more by institutional and professional traders than by casual retail traders, due to CME’s market structure, margining, and access requirements.
Because CME is the world’s largest derivatives marketplace, the universe of assets that can underlie binary-style or event contracts is very broad. The main categories include equity index futures, forex, physical commodities, and macroeconomic and event outcomes.
Pricing and mechanics: a $0–$100 world (or scaled variants)
On regulated U.S. exchanges the pricing convention for classic binaries is straightforward. Contracts trade at a price between $0 and $100 (or between scaled equivalents such as $0–$10 on some event contracts) and that price represents the market’s current valuation of the probability that the contract will finish in-the-money.
If you buy a binary at a price of $40 and hold it to expiry, and the contract settles at $100, your gross payoff is $100. If it settles at $0, you receive $0. The market price therefore tells you how much it costs to buy that yes/no exposure in real time. The difference between the $100 payoff and the price you pay is your gross profit if the outcome is favorable. Many U.S. exchange products also offer event contracts and spreads that change the nominal scale (for example $0–$10 payouts) but the arithmetic logic is the same: entry price versus fixed settlement value.
How to calculate your return
The basic accounting for a long binary position you hold to expiry is net profit = settlement value − entry price − trading fees. To express that as a percentage return on your capital at risk: net return (%) = (net profit ÷ entry price) × 100.
Example:
Assume you buy one binary contract at an entry price of $35.00. The contract settles at $100.00 if it finishes in the money. Assume total exchange/broker fees for the trade (round trip) are $2.00. Net profit = settlement value − entry price − fees. That is:
- Settlement value − entry price = $100.00 − $35.00 = $65.00.
- Subtract fees: $65.00 − $2.00 = $63.00 net profit.
- Compute return on cost (percentage): net profit ÷ entry price = $63.00 ÷ $35.00. So the quotient is 1.8, which equals 180%. Therefore net return = 180%.
That example highlights why binaries can show very large percentage returns on small entry prices. The entry price is a fraction of the fixed payout. But it also shows the flip side: if the contract instead settles at $0.00, your loss is roughly the entry price (plus any entry fees you paid), so the product is high-variance and binary in outcome.
Always model both the upside and the downside, including exact fees and the possibility of exiting early.
For official fee rules and exact settlement mechanics, check the exchange fee schedule, because fees and settlement conventions do vary by venue.
Practical steps for a U.S. trader
Start by confirming the venue’s regulatory status. If you need event exposure rather than a price binary, look for regulated event contracts or dedicated exchanges and check any special regulatory carve-outs (as in certain political markets) before participating.
Read the applicable rulebook and fee schedule. Understand the settlement unit (is the payout $100, $10, or some other scale?). Model both the win and loss scenarios, including fees. If possible, learn the platform using a free demo account instead of using real money.
If you decide to proceed, run a small live test to observe fills and the real execution price behavior before scaling.
Remember: If a platform solicits U.S. residents but lacks a U.S. regulatory listing, walk away. You can report suspicious solicitations to the CFTC.
Similar products and event contracts
Exchanges and regulated platforms with the correct permissions can also list binary-like event contracts that pay on the occurrence of a specified event rather than a price crossing. Example: “Will X candidate win?” or “Will weekly jobless claims be above Y?”.
Some of these are run under special regulatory frameworks in the U.S. Political prediction markets like PredictIt have historically operated under specific conditions and exemptions for academic/research purposes, and courts and regulators have negotiated their regulatory status as rules evolve.
Exchanges may also offer short-term “call spread” or “knock-out” contracts that look and feel like binaries but use different settlement scales or spread mechanics. The practical effect for a trader is the same: limited, known upside and limited, known downside. But the legal and clearing framework differs.
If event-type exposure is what you want, use an exchange-listed event contract or a platform operating with clear regulatory authorization.
Understanding the PredictIt case
Over the years, PredictIt’s regulatory status has evolved. For much of its history, PredictIt was allowed in the U.S. under a CFTC “no action” letter. This is a type of limited relief, and the letter allowed PredictIt to run political markets for research/academic purposes with strict limits on traders and trade size. In 2022, the CTFC rescinded that letter, which lead to a legal fight. PredictIt paused some operations while challenging the agency’s efforts to shut it down.
In mid 2025, a federal court ruled in PredictIt’s favor, allowing continued operation and prompting a revised CFTC no action letter that lifted the prior cap on number of traders and increased position limits. As of late 2025, the CFTC issued formal approvals for PredictIt’s operator to be a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO). This brought it into the mainstream regulatory framework used for U.S. derivatives exchanges.
For years, PredictIt’s fate was uncertain because political betting is generally prohibited under U.S. law unless specifically exempted. The new regulatory approvals clarified PreditctIt´s legal status and allows it to operate more like a traditional financial exchange. This formal regulatory status also aligns it with financial compliance standards, e.g. when it comes to record-keeping, surveillance, and reporting.
FAQ — Binary options in the United States
Are retail binary options legal in the United States?
Yes, but only in a narrow and strictly supervised form.
Who regulates binary options and event contracts in the U.S.?
In the U.S., the regulation of binary options depends on the underlying asset and the type of investor involved, which is why some fall under the SEC and others under the CFTC. The SEC (Securities and Exchange Commission) has authority over securities under the Securities Act of 1933 and the Securities Exchange Act of 1934. This includes stocks, bonds, ETFs, and options on securities, including security-based swaps. When a binary option is based on a stock or a stock index, it is considered a derivative of a security, and the SEC has jurisdiction. For example, a binary option that pays out if Apple stock exceeds a certain price or one tied to the S&P 500 index would be regulated by the SEC, and platforms offering these instruments must comply with SEC registration and rules.
In practical reality, legal retail binary options based on securities and security derivatives do not exist in the U.S. There are no SEC-regulated retail binary options available. All the legal retail binary options are based on underlyings that fall under the Commodity Exchange Act and are offered on a CFTC-regulated exchange.
In this context, commodities and commodity derivative are very broadly defined. Not only does this category include traditional physical commodities such as gold, oil, natural gas, and agricultural products, but also things such as foreign exchange rates, interest rates, and macro or economic indicators that the CFTC treats as commodities for regulatory purposes. The CFTC also regulates retail binary options based on things like weather events, economic releases. Certain event contracts such as election outcomes or policy decisions can also be permitted, when the CFTC has explicitly allows them.
So, does this mean that there are no binary options in the U.S. based on equities or equity derivative? No, because non-retail binary options based on such underlying assets do exist. Under U.S. law, those products fall under SEC jurisdiction and are effectively restricted to institutional participants. There is no approved framework for offering equity-based binary options to retail traders.
How are binary options priced in U.S. exchange markets?
On U.S. exchanges that offer binary-style contracts the price convention is simple: contracts trade on a fixed payout scale (commonly $0–$100, or scaled variants such as $0–$10). The quoted market price represents the market’s current valuation (implied probability) that the contract will finish in the money. Buying at a quoted price gives you that exposure. If the contract settles at the upper payout you receive the full payout, if it settles at zero you receive nothing. Different exchanges may list scaled or spread variants, but the underlying pricing logic is the same.
Are there similar products to binary options available in the U.S.?
Yes. Exchanges and regulated platforms offer event or prediction contracts, short-term spread products, and other limited-payout derivatives that function like binaries for particular outcomes (economic releases, election or sports outcomes, index moves).
Platforms such as Kalshi and Polymarket are trading event contracts, but the legal contours for event contracts have been actively litigated and are still evolving. Be aware that regulatory proposals and state laws sometimes seek to limit certain event contracts, e.g. when they clash with state gambling rules. You can read more about these platforms and their regulatory status by visiting BinaryOptions.net.
Kalshi operates in the U.S. as a CFTC-regulated designated contract market (DCM), meaning its event contracts (yes/no outcomes on things like elections, economic data, weather, and other events) are treated as federally regulated derivatives under the Commodity Exchange Act and subject to full CFTC supervision, including reporting, clearing, and surveillance requirements. This regulatory status has allowed Kalshi to list real-world event contracts for U.S. users, although it is facing ongoing legal challenges from some state regulators over whether certain contracts (especially sports outcomes) fall under state gambling laws as well as federal commodities law. So far, some court decisions have supported Kalshi’s view that its contracts fall under CFTC jurisdiction rather than state gaming law, but litigation continues in multiple jurisdictions.
Polymarket’s regulatory journey has been even more complex. In 2022, the CFTC took enforcement action against Polymarket for offering unregistered event-based binary options to U.S. users, leading the platform to block U.S. access. Since then, Polymarket has pursued compliance by acquiring a CFTC-registered derivatives exchange and clearing entity (QCX), securing an amended designation that would allow it to operate as a regulated exchange for U.S. customers. As of late 2025, the CFTC has issued no-action relief and an amended designation enabling Polymarket’s return to the U.S. market under CFTC oversight, requiring enhanced surveillance and clearing procedures consistent with regulated exchanges.
Both cases illustrate how event contracts in the U.S. are regulated as derivatives under the Commodity Exchange Act when offered on registered exchanges, and that the scope of what types of event outcomes can be listed (e.g., politics, economics, sports) and how they interact with state gambling laws or federal jurisdiction is still being tested in courts and through regulatory actions. Some state authorities have pushed back, issuing cease-and-desist orders on the basis that certain event contracts resemble prohibited betting, while federally regulated platforms continue to assert CFTC preemption.
What are the main consumer-protection and fraud risks to watch for?
If you chose to use a binary options platform based in a country where broker supervision and trader protection is weak, you increase the risk of being defrauded. Examples of commonly reported issues are platform price-feed manipulation, withdrawal refusals, aggressive marketing, and opaque terms and conditions (especially for bonus offers). When you run into problems, you are likely to find out that strong trader protection rules are either absent in this jurisdiction or simply not well enforced. In stricter jurisdictions, such as the U.S., traders can report a sketchy broker to the applicable financial authority (e.g. the CFTC) and suspected fraud and other financial crimes can also be reported directly to the police. As a trader, you have much better access to recourse when you stick to brokers and platforms based in stricter jurisdictions. Also, to avoid jurisdictional complexity, the best choice for a trader in the U.S. is brokers, platforms, and exchanges based in the U.S.
Before you trade, verify the legal entity that will be your counterpart, and then verify their U.S. registration and permissions.