Legal situation with binary options in the US

Binary options trade is exceptionally popular in the United States. One of the reasons is that the whole industry was generally created in the US and there is a significant number of binary options brokers that accept US residents as clients. Meanwhile, in Europe, the growing number of countries which decide to ban binary options offers another side of the medal. France, Belgium, and the Netherlands have a strict opinion when it comes to this kind of trading, and even advertising these services is illegal. Nevertheless, the US remained open to the binary options market and allowed traders the possibility to receive services from other brokers outside the US. Despite the fact, binary options trade is still contradictory to a great extent.

There are many articles available online which present the risks and facts concerning binary options trade. Some consider it to be equal to gambling, while others believe it is a perfect way to present their skills in economics and concern themselves as top traders. Whatever the fact may be, there are some things that we all need to have in mind

The Current State in the US and the Reasons Behind

As it was already mentioned, binary options trade enjoys great attention in the US. They are not illegal in the US according to both federal law and state law in each state; the US government have labeled binary options trading as a form of gambling.

However, there is one thing that they care a lot about, and it is the CFTC license. This license is not easy to get, but the companies which are under CFTC regulation can offer their services to the US citizens. The companies which are not licensed with CFTC can exist on the territory of US but cannot offer their services to the US residents. It means it is legal to trade, but it is not legal for brokers to operate everywhere.

It may be confusing at first, but it has a simply explanation behind. Traders can make their decisions and get services at their expense and risks anywhere they want. Brokers that are not regulated can cause many troubles for the country as well. Because of that, the country is trying to protect themselves by forming the regulatory authority.

There are many binary options brokers which are not licensed by CFTC, but that accept USA traders. Most of these brokers are licensed in Europe, especially Cyprus which has one of the best regulatory authorities. On the other hand, the atmosphere in the US is not welcoming when it comes to offshore companies.

This further means that binary options trading laws are particularly restrictive in the US. The CFTC license has only a handful of companies such as Nadex and currently no offshore broker has a license in the US. However, offshore brokers cannot even be regulated by the US law, which allows traders the possibility to find more possibilities for themselves.

The CFTC and SEC have a difficult task when it comes to offshore companies. Namely, they have a hard time with identifying offshore companies either as legal or illegal. For example, in 2013, the CFTC and SEC issued a warning document for all US traders where they again emphasize that many online platforms do not operate in accordance with CFTC, SEC, and FINRA regulations. In 2015, the CFTC again published a new warning called the RED List or Registration Deficient List against all international brokers who do not have a formal CFTC license but yet still offer their services to US citizens. We see that the USA is also in a kind of undefined environment, since the CFTC is not always sure if a given offshore company is in line with US regulations or not. It is not even clear if these warnings can lead to legal consequences or if they are just a nice gesture of CFTC to keep options traders away from potential offshore scammers. Even if companies which operate in the USA without a proper CFTC/SEC/FIINRA license are considered illegal, these companies are hard to track down and bring to justice before a US court.

Future of Binary Options

According to the popularity of this form of earning money, the binary options trade is still going to have bright future in front of it. However, it is not easy to say if the service is going to be totally legal, or the scam companies ruined that possibility and caused that people become more cautious when it comes to investing money in these services. The most probable outcome is that some of the countries will make binary options legal and available, while others will decide that it is for the best that this service becomes labeled as illegal.

The gap between these countries already exists, and it will probably grow bigger in the future. This scenario is more likely to take place than the one where some countries decide to change their opinion and admit that others were right – no matter if those are countries which are currently for banning binary options trade or countries which allow legal binary options services.

Legal vs. Illegal Brokers

It is the well-known fact that some of the brokers are operating legally in the US. However, the laws in the US are not that strict for brokers of binary options as they are for brokers for Forex or some other trade types. Rare are those which are regulated by the CFTC. The only company which has headquarters in the US, and which is regulated by the CFTC is Nadex. Besides, there are many companies which are based in other countries but provide their services to US citizens such as Binary Mate, Bol Financial, and MarketsWorld.


If you get services from a non-regulated broker, you can never be sure that there is no third party who monitors the transactions you make. In most of the cases, the thing that regulatory authorities are trying to enforce, your accounts will be separate from the companies account. Therefore, if anything goes wrong, your funds will be safe. Further, if your broker is regulated, the third-party is there to ensure fairness. Many things are up to chance, and since this is the fact, the risks are possible any time with both regulated and unregulated brokers. It means that no law can protect you if you decide to be irresponsible and reckless.