Binary Options Regulations and Regulators

When first introduced in 2008, binary options were considered yet another form of online betting and were instantly put in the category of gambling, thus the regulation was at first overseen by gambling commissions. However it didn’t take much time for certain counties to see the potential and investment possibility of online trading, which resulted with significant changes in the attitude and perception of state authorities towards binary options.

Today, binary options are considered a legitimate business and countries such as UK, USA, Japan, Australia, Cyprus, Malta etc. have recognized this market as an legitimate form of investment which means that financial investment service providers now have to pay taxes, obey laws and regulations and of course they have to have a valid license from reputable regulatory authorities in order to operate. 

In this way traders are protected from abuses or scams by law, which is some kind of a guarantee in terms of safety and security of your assets and offers greater transparency of the whole process.

Over the last few years, traders started paying more and more attention to weather or not a specific Binary Options broker is regulated. But, what does it mean for a broker to be regulated and who or what takes care of the regulation process.

Binary Options Regulations and Regulators

Broker Regulation

Regulation is a method for providing security and protection to the traders from fraud, scams, manipulation and abuse from the brokers by providing them with a set of rules and laws that control their behavior. For a broker to become regulated and to start offering its services in a specific market, it need to fulfill the requirements of a regulating institution both as a organization and as services offered (trading platform). Upon successful completion of the process, the regulating authority, licenses the broker to operate in the market.

The regulation and licensing are not bureaucratic formalities, but an important effort in protecting the traders from bad brokers and ensure that you are offered a legitimate product.

The most important part of regulation is ensuring that you receive your winnings without any misbehavior on the broker side.

Regulating Authorities

The regulating authorities are usually government institutions or parts of institutions dealing with financial operations in a specific country or state. Here are some of the most important regulators in the Binary Options industry worldwide:

  • CySEC (Cyprus Securities and Exchange Commission) - Operating under MiFID, the regulation requirements of CySEC are not as strict as those of other European financial institutions. Nevertheless, traders from the EU and EEA can trade on sites / brokers that are regulated by CySEC and enjoy protection from potential problems and issues with the brokers.
    Since there are many Binary Options brokers that are registered business in Cyprus, they are under the direct jurisdiction of CySEC and other EU institutions, making the process of complaints and sanctions easier for the authorities.
  • GSC - The Isle of Man Gambling Supervision Commission is an independent statutory board established in 1962 that regulates online and offline gambling. Although Binary Options trading is not considered gambling, it is being regulated by the GSC due to the fact that it is related with high risk actions.
  • MGA - Just like the GSC the Malta Gaming Authority is the institution in charge of all gaming activities in Malta, both online and offline.

While regulation is not a 100% guarantee, it can leads to sanctions for the broker without hard proof or specific reason, like the recent CySEC fine for BDSwiss on suspicion of possible violations of the Investment Services and Activities and Regulated Markets Law from 2007 and of the Directives issued pursuant to the Law.

Regulated Binary Options Brokers in the United States

When it comes to traders from the United States, most binary options brokers do not allow or provide access to trading platforms to US customers. Over the years there were many scams and violations reported in the US to two institutions, resulting in a negative opinion for the whole industry. The US Securities and Exchange Commission (SEC) and US Commodity Futures Trading Commission (CFTC) are the two institutions that might open up the binary options market for US traders by regulating and allowing legitimate brokers.

Binary Options Regulation in Germany

Binary Options trading is considered legal in Germany as well as many other countries in the European Union. While the Federal Ministry of Finance of Germany via the Financial Supervisory Authority (BaFin) have not provided specific laws or regulations that govern the binary options trading in the country, local traders are free to trade and brokers licensed in any other EU member states are free to offer binary options trading services and platforms to German nationals.

This absence of laws, means that people in Germany are allowed to trade online without any limits on the amounts and deposits up to the moment when specific EU or German laws are introduced.

France and Other EU Member States

Same as Germany, France does not have any specific laws concerning binary options, so trading is legal and allowed but it is not regulated by any domestic institution.

French traders are encouraged to look for brokers licensed and regulated in other EU member states like Malta and Cyprus, since companies that are legally licensed in one member state, carry the same statue in other states of the union. Depositing money with non-licensed brokers is not advised since there are many complaints and if something goes wrong, you can not do anything to get your deposit or winnings back.

We will try to keep this page up to date will all the latest laws and regulations related to binary options trading around to world. If you feel like we have missed some important aspect, or you would like to see the regulations for a specific country, feel free to contact us.