Consumer watchdogs have placed a permanent ban on gambling on binary options in the UK.
The Financial Conduct Authority ban starts from April 2, 2019 and applies to anyone selling, marketing or distributing binary options to customers in the country.
Binary options are a simple ‘yes/no’ bet on the movement of an investment.
The potential pay-out is predetermined, with an investor usually losing their initial stake if their prediction is wrong, or receiving a fixed pay-out if they are right.
For example, consumers could bet at 2.00 pm that the value of gold will either increase or decrease in price by 2.05 pm. No buying or selling of gold takes place, just a gamble on if the price will rise or fall.
Gambling dressed up as financial products
The market has been dogged by scams and fraudsters that the FCA believes cost consumers £17 million a year.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “Binary options are gambling products dressed up as financial instruments. By confirming our ban today we are ensuring that investors don’t lose money from an inherently flawed product.’
“UK consumers should continue to be alert for binary options investment scams and should only deal with financial services firms that are authorised by the FCA. As the sale of binary options to retail consumers is now prohibited, any firm offering binary options services to retail consumers is likely to be a scam.”
The FCA placed a temporary ban on binary options promoters in March 2018.
Police alert as scam reports flood in
The ban follows intensive work by police scam alert web site Action Fraud to warn consumers about the risks of betting on binary options.
Detective Superintendent Glenn Maleary said: “We have seen an increase in binary options fraud in the last two years. Opportunist fraudsters have taken advantage of an unregulated market and done everything can to defraud unsuspecting investors.
“Anyone who invests in binary options should be vigilant about who they are trading with and should follow our protection advice to ensure that they don’t fall victim to what is becoming a commonplace investment scam.”
Action Fraud dealt with 305 reports alleging binary option scams the year to May 2016