or is it better to allow and supervise binary options?
During the second-half of the 2010s, regulators in many different countries around the world, including UK, took steps to prohibit brokers from marketing, offering, and selling binary options to retail traders (non-professional traders). The idea was to protect consumers from harm and steer them towards financial products more suitable for retail traders.
But how has it worked out? When retail binary options brokers could not longer be based in and licensed by strict financial authorities, many of them moved on to the most lax jurisdictions they could find, where binary options companies can operate with minimal oversight and trader protection rules are either absent or not enforced. They still market their products to retail traders in prohibited jurisdictions and allow sign-ups from these countries.
This begs the question: Have the bans been effective in protecting consumers from the harm of binary options? Or has it only pushed binary options companies into jurisdictions where trader protection is extremely weak? Would it have been better to allow binary options platforms to serve retail traders while licensed and supervised by strict financial authorities, from jurisdictions where trader protection is taken seriously? And is it possible to put the genie back into the bottle now? If countries such as the United Kingdom, Australia, and the European Union members would change their rules, would it be enough to win back the binary options companies, or would they prefer to remain in the permissive jurisdictions where they currently operate without oversight?
What regulators did in Italy
In 2018 the European Securities and Markets Authority (ESMA) used emergency product-intervention powers to temporarily prohibit the marketing, distribution and sale of binary options to retail clients across the EU. The idea was to immediately protect the EU consumers, while giving the respective national authorities time to develop their own binary options regulation on the national level.
In the UK, the Financial Conduct Authority (FCA) introduced a permanent ban in 2019 on the sale, marketing, and distribution of binary options to retail consumers, replacing the temporary ESMA measures as they fell away. The FCA’s rules took effect on 2 April 2019 and went slightly further than the earlier EU action by also covering securitised binary options. Since then, the FCA has backed the ban with public scam warnings, its Warning List, and repeated guidance that any firm offering binary options to UK retail consumers is likely to be a scam.
Throughout the European Union, the respective membership countries enacted similar bans, which are still in effect. The main theme is to put the onus on the sellers of binary options, rather than the consumers. It is prohibited to market, offer, and sell retail binary options, but a retail trader who purchases a binary option is not breaking the law. Consumers who engage with binary options brokers despite the public warnings should be able to report any issues to their financial authority without fear of reprisals.
Examples from other parts of the world
Here are examples of countries outside the EU where retail binary options are banned or heavily restricted.
Australia
In 2021, the Australian Securities and Investments Commission (ASIC) issued a product intervention order that prohibits the issuing, distribution, and marketing of binary options to retail clients in Australia. The ban came into effect on 3 May 2021 and has been extended until October 2031. The ban targets providers selling the products. Retail clients are not criminalized, but brokers must not issue, distribute, or market binary options to them.
Israel
Israel used to be an important hub for binary options brokers who marketed their options to retail clients inside and outside Israel, including Europe. As legislator began to investigate the widespread issues within the binary options industry during the second half of the 2010s, Israel became the first country to ban brokers from selling retail binary options.
In 2016, the Israel Securities Authority (ISA) banned the sale and marketing of binary options in Israel and prohibited Israeli binary options firms from operating domestically. This was based on the regulator’s view that binary options resemble gambling, not legitimate investment trading, and posed serious fraud risks. This domestic ban was put in place around March 2016. The ISA used its regulatory authority to prohibit licensed Israeli trading platforms from offering binary options to customers in Israel.
After the domestic ban, Israel moved to extend the prohibition so that Israeli-based firms could not offer binary options to clients outside Israel either. This was done through formal legislation passed by the Israeli Parliament (Knesset) on 23 October 2017. The ban came into force on 26 January 2018.The law made it a criminal offense to operate binary options trading platforms in Israel, and the rule applies regardless of where the client lives. Operating or managing such a platform from within Israel, even if all clients is a foreigner living in another country, is unlawful and punishable by up to two years in prison. This effectively closed down the Israeli binary options industry at its source, not just for Israelis but globally.
Canada
Canada has effectively prohibited the retail offering of binary options with short expiry terms (less than 30 days) nationwide through coordinated securities regulation by the Canadian Securities Administrators (CSA) and provincial bodies. Long-term binary options (30 days or more) are still legal, but at the time of writing, no entity holds the required license to sell them in Canada. The reality is that retail binary options platforms are not interested in selling long-term binary options, so they won´t even bother to apply for a Canadian license.
On 28 September 2017, the CSA adopted Multilateral Instrument 91-102 – Prohibition of Binary Options, which explicitly prohibits advertising, offering, selling or otherwise trading a binary option with a term to maturity of less than 30 days to individuals or entities created solely to trade binary options. The instrument came into force on 12 December 2017 in participating jurisdictions (with timing exceptions for some provinces like Saskatchewan based on filing dates). Under this instrument, binary options shorter than 30 days are treated as unlawful securities/derivatives when offered to retail clients and cannot be advertised, offered or sold in Canada through registered or unregistered brokers.
China
In China, binary options trading is not recognised or regulated as a financial product under the domestic securities or futures regulatory framework. The China Securities Regulatory Commission (CSRC) does not authorise such trading through licensed brokers onshore. Domestic financial institutions and licensed brokers are not permitted to offer binary options to retail clients in China. There is no formal “binary options ban law” with a clear enactment date. Rather, the restrictive approach is embedded in the general rules of the Chinese financial markets. Binary options are not part of the products that can be offered by registered securities or derivatives firms. As a result, no broker in China holds a licence to offer binary options to the public.
Chinese regulators have also blocked access to many offshore binary options trading platforms and discourage domestic payment channels (e.g., UnionPay, Alipay) from being used to fund such accounts. These measures are implemented via administrative and supervisory actions, not specific legislation naming “binary options”.
Consumers (retail traders) are generally not criminally prosecuted simply for trading binary options through offshore brokers. There is no explicit law that makes it a crime for an individual in China to trade binary options with an offshore platform. However, Chinese authorities treat gambling broadly as illegal under national law on the mainland (e.g., lotteries and casinos are banned on the mainland), and some authorities have equated binary options with gambling-like speculative activity, which could expose participants to legal risk under general anti-gambling statutes in some circumstances. So far, enforcement in practice has focused on platforms and promoters, rather than punishing individual retail users who access foreign services, but retail users are not acting without any legal risk since the field is a bit of a gray area and they risk being punished under gambling legislation.
Has the ban reduced the number of individuals using binary options in the uk?
There isn’t any clear, publicly available official dataset showing the exact impact of the UK ban on the number of people using binary options, in the sense of a clean before-and-after time series of trader counts. What the public record does show is the direction of travel, but not a precise user drop.
What we do know is that UK regulators saw binary options as a serious and growing retail-harm problem before the ban. In 2017, the FCA warned that a majority of consumers lost money trading binary options and highlighted widespread scam activity around the product. It also said consumers in the UK were losing more than £87,000 a day to binary options scams.
At the European level, ESMA concluded in 2018 that binary options posed “significant investor protection concerns” and temporarily prohibited the marketing, distribution, or sale of binary options to retail investors across the EU. ESMA’s supporting analysis said national regulators had found consistent losses on retail clients’ accounts in binary options.
In the UK specifically, the FCA then moved from consultation to a permanent domestic ban. In December 2018, it proposed a permanent prohibition and estimated that the measure could save UK retail consumers up to £17 million a year. The permanent ban took effect from 2 April 2019, prohibiting firms acting in or from the UK from selling, marketing, or distributing binary options to retail consumers.
What is missing from the public material is a year-by-year count of active UK binary options users before and after the ban. The FCA’s public documents focus on consumer harm, product design, losses, and enforcement logic, not on publishing a detailed participation time series. After the ban, the FCA’s public messaging also shifts away from retail usage figures and toward warnings that any offer of binary options to UK retail consumers is likely to be a scam.
So the defensible UK version is this: there is strong official evidence that regulators believed binary options were causing widespread harm and that the ban was expected to reduce both losses and scam exposure, but there is no widely available official dataset showing the exact numerical fall in UK user participation after the ban.
How prohibition drives users to foreign platforms — and why that matters
A ban does not eliminate demand. A subset of consumers will try to find alternatives, or simply be unaware of the ban. An ordinary consumer seeing an appealing add online for a trading platform promising a big welcome bonus and quick profits might not stop to think much about legal issues.
CONSOB and other financial authorities are working hard to block sites that market to retail users in their respective jurisdiction, but it is a game of whack-a-mole and new sites and apps keep appearing. It is also possible to use VPN services to avoid certain blocks, although this requires more of an effort from the retail user and we can assume that retail users circumventing blocks in this way are at least aware of there being a ban.
What we do have is a situation where retail traders in Italy can not longer find any binary options platforms licensed and supervised by CONSOB or any of the other EU member financial authorities, e.g. CySEC or MFSA. They platforms that are still marketing to EU countries despite the bans are typically based in very lax jurisdiction where trader protection laws are weak and trading platform companies operate with little to no supervision.
EU traders using these foreign platforms do not get the trader and consumer protection they are used to from their native jurisdictions, and many do not even realize how unprotected they are until something goes wrong. It is easy to not care about consumer protection and recourse until you find yourself in a situation where your broker has frozen your account from withdrawals and customer service is ignoring your calls and messages. Weak consumer protection, opaque withdrawal rules, and non-existent dispute resolution paths is not a problem as long as everything is going great.
Third-party intermediaries
Some operators in lax jurisdictions utilize local agents, sketchy payment processors, voucher systems, or cryptocurrency routes to accept deposits. These intermediaries add layers of counterparty risk and make recovery through normal banking or legal channels even harder.
Higher-risk products
Based in a lax jurisdiction, a trading platform can offer especially high-risk retail products that a CONSOB license would never have allowed.
Could a legal path have worked better?
There are plausible regulatory alternatives to an outright ban, an some advocates argue these would have preserved consumer choice while removing the worst abuses in Italy and the rest of the European Union.
Key elements of a legal path can include:
• Mandatory licensing.
• Mandatory capital requirements for sellers.
•Mandatory client money segregation and audited accounts so withdrawals are reliable, even if the company becomes insolvent.
• Strict product design rules and execution rules. Limiting expiry windows, guaranteeing transparent payoff formulas, banning incentive schemes that lock funds, and requiring execution fairness.
•Independently provided and audited price feeds for the underlying assets.
• Tight marketing and solicitation controls. Prohibiting cold-call recruitment, banning false testimonials, and requiring clear risk disclosures.
• Strong monitoring of payment chains and mandatory AML/transaction monitoring.
• Mandatory participation in conflict resolution mediation provided by COSOB.
Many of these stipulations are already in place for the brokerage firms that operate with a license from COSOB or from any of the other financial authorities within the European Union. There would be no need to re-invent the wheel, as a lot of rules could simply be taken from these existing frameworks and applied to licensed binary options sellers, under the MiFIDII directive. In theory, these measures could create a safer, EU regulated market where appropriate consumer protections reduce both gambling-style losses and outright fraud.
An alternative: Treating retail binary options as gambling products
While discussing the pros and cons of retail binary options bans, it is also worth mentioning that some countries, such as Indonesia, has elected to classify binary options as gambling products. In the specific case of Indonesia, this means that binary options are illegal, since gambling is banned under Law No. 7 of 1974 on the Ratification of the Criminal Code (KUHP) and Law No. 9 of 1961, as well as various government regulations. However, in countries where gambling is legal, but regulated, classifying short-term retail binary options as gambling product could be a way forward.
Short-term binary options are often (and rightfully) criticized for being more akin to gambling products than actual financial trading. Ultra-short-expiry combined with the all-or-nothing model makes buying a binary option fairly similar to putting your money on red at the roulette table and hoping Lady Luck will be on your side.
In countries where gambling is legal but restricted, gambling laws typically take the psychological effects of short-term expiry and all-or-nothing models into account, and include various harm reduction rules that pertain to this type of gambling products. Buying a lottery ticket where you get the results 30 days from now does not have the same psychological impact as putting a coin into a “one-armed bandit” (slot machine) and wait 5 seconds for the result.
It is possible that the future for short-term retail binary options in Europe is to be found in the gambling sector rather than the financial trading industry. We already have a blueprint available in the United Kingdom, where financial brokers are banned from selling retail binary options, but a properly licensed gambling firms can offer financial spread betting.