Why Is Binary Options Banned in Some Countries? What Regulators Say

Regulators in the United Kingdom, Germany and Australia have prohibited the marketing, distribution or sale of binary options to retail clients, and each has published its reasons. This page summarises those stated reasons and does not assess them.

What the Restrictions Cover

In the United Kingdom, the Financial Conduct Authority (FCA) confirmed permanent rules prohibiting binary options sales. The FCA stated: "All firms acting in or from the UK are prohibited from selling, marketing or distributing binary options to retail consumers." The regulator confirmed that its rules are permanent and came into force on 2 April 2019. For additional regulatory context, see our guide to binary options in the United Kingdom.

In Germany, the Federal Financial Supervisory Authority (BaFin) published its own prohibition on the marketing, distribution and sale of binary options to retail clients. BaFin announced: "The marketing, distribution and sale of binary options to retail clients will remain prohibited in Germany." BaFin's general administrative act is applicable from 2 July 2019. BaFin's order lists specific conditions and exceptions; for details on those statutory conditions without listing them here, see our guide to binary options in Germany.

In Australia, the Australian Securities and Investments Commission (ASIC) exercised its product intervention powers. ASIC stated: "ASIC has made a product intervention order banning the issue and distribution of binary options to retail clients." ASIC added: "The ban will take effect from Monday 3 May 2021." For the Australian statutory framework, consult our guide to binary options in Australia.

All three regulatory interventions explicitly apply to retail clients or retail consumers rather than professional market participants. For broader comparisons across jurisdictions, consult our country-by-country legal guides.

Reasons ASIC Gave

When announcing its product intervention order, ASIC set out three structural characteristics of binary options contracts in its announcement. First, ASIC pointed to the all-or-nothing payoff structure, where one of the two possible outcomes is that the retail client loses the whole amount invested. Second, the regulator cited short contract durations, noting that the average contract duration for binary options traded with one provider was under six minutes. Third, ASIC highlighted negative expected returns, meaning that the present value of the expected payoff for a binary option contract is lower than the initial investment.

In ASIC media release 22-118MR, ASIC said that in the 13 months before the ban, between 74% and 77% of active retail clients lost money trading binary options.

Reasons BaFin Gave

BaFin published several specific concerns when explaining its administrative restriction. The German authority stated that binary options are complex and lack transparency, particularly with regard to how their performance and the underlying are calculated. BaFin noted that the provider determines the price, leaving clients unable to understand the pricing mechanism or check its accuracy. Furthermore, BaFin pointed out that providers usually act as the direct counterparty to their clients' trades.

Regarding contract horizons and investor assessment, BaFin observed: "As binary options typically are extremely short-term instruments, it is difficult for retail investors to accurately assess the risk-return profile."

What the FCA Said

When publishing its confirmation of the permanent prohibition, the FCA statement quotes Woolard: "Binary options are gambling products dressed up as financial instruments."

In assessing the financial consequences for the retail public, the regulator stated: "The FCA estimates the permanent ban on binary options could save retail consumers up to £17m per year."

The EU Position

At the European Union level, the European Securities and Markets Authority (ESMA) initially imposed a temporary EU-wide prohibition on the marketing, distribution or sale of binary options to retail clients through a series of product intervention decisions. In its notice of 1 July 2019, ESMA announced that it would not renew this temporary intervention because most national competent authorities across EU member states had taken permanent national measures at least as stringent as its own measure. For further background on European national adoptions, see our guide to binary options in the European Union.

Frequently Asked Questions

Is binary options banned everywhere?

This page covers only the specific regulators named, and each restriction is described in published regulatory documents as applying to retail clients or retail consumers rather than establishing a blanket worldwide ban.

What reasons did ASIC give?

ASIC highlighted the all-or-nothing payoff structure where one outcome is losing the whole amount invested, contract durations averaging under six minutes with one provider, and negative expected returns where the present value of the expected payoff is lower than the initial investment. ASIC also noted in media release 22-118MR that between 74% and 77% of active retail clients lost money in the 13 months before the ban took effect.

What reasons did BaFin give?

BaFin stated that binary options are complex and lack transparency regarding performance and underlying calculations, the provider determines the price without clients being able to understand or verify it, and providers usually act as the direct counterparty. BaFin also stated: "As binary options typically are extremely short-term instruments, it is difficult for retail investors to accurately assess the risk-return profile."

Does this page address whether an individual could face liability?

This page summarises what the regulators' published guidance says. It does not address whether an individual could face liability. Seek independent legal advice.

Sources and Official References

• FCA: Statement on permanent ban on binary options to retail consumers (29 March 2019)
• ASIC: ASIC bans the sale of binary options to retail clients (media release 21-064MR)
• ASIC: ASIC proposes extending its binary options product intervention order (media release 22-118MR)
• BaFin: Marketing, distribution and sale of binary options to retail clients will remain prohibited in Germany (applicable from 2 July 2019)
• ESMA: ESMA ceases renewal of product intervention measure relating to binary options (1 July 2019)

This page summarises what the regulators' published guidance says. It does not address whether an individual could face liability. Seek independent legal advice.