Binary options trading in the US is not only legal, but it is also regulated, has low capital requirements, and what's more, it is available to retail traders. However, the industry's reputation among investors has been tarnished over the practices of unregulated non-US brokers. Determining precisely how you can safely and legally trade binary options can be difficult in some cases. Tytanid is here to clear these doubts for you.
Binary options legal framework
Are binary options legal?
Yes, binary options trading is legal provided that it is done on the platform of a regulated broker in the USA. However, there are many trading platforms outside the United States that are unregulated. In practice, this means that they have no regulatory oversight from the Commodity Futures Trading Commission (CFTC). It is illegal for these brokers to offer their services in the US.
How to legally trade binary options
In any case, be sure to only trade on a platform owned by a regulated provider. Make it a habit to always pay close attention to the CFTC regulations to ensure that the exchange where you trade binary options is regulated. This is especially important to protect you from the unscrupulous and dishonest owners of some trading platforms.
One of the first things you should do is to make sure that the broker is based in the USA. Be aware that some of the providers of binary options trading systems are offshore companies that seek your attention and money. If the exchange where you trade in binary options is registered abroad and does not have a license in the United States, this should raise your concern. This is because in the future you may encounter difficulties if a dispute arises and the supplier is a foreign company. You should be very careful with non-US binary options exchanges as there may be times when you are not backed up or protected. This situation is not uncommon. The CFTC and the Securities and Exchange Commission (SEC) have received many complaints in the past about fraud that was committed by online brokers that were not regulated in the United States. The most common cases include:
- Identity theft
- Manipulating online software to create loss-making trades
- Refusal to credit accounts or refund funds
Consequently, this means that by using a foreign binary options exchange you may end up without any legal protection.
Trade using only your cryptocurrency wallet. Cryptocurrency binary options are traded on an exchange like Tytanid. No third party may trade using your account. Anyone who claims otherwise (especially on social media) is not affiliated with Tytanid and is acting against the law.
Illegal practices related to binary options
How to identify an illegal binary options provider
Now that you are aware that soliciting traders in the United States is illegal for offshore providers, it will be much easier for you to avoid illegal binary options financial operations. In any case, first check the location of the broker to find out in which jurisdiction the platform operates.
The second step you should take is to check whether the binary options exchange has a license. It happens that binary options trading brokers sometimes act in violation of the law because their platforms are unregistered and unregulated. In practice, this will depend on the type of binary options offered, as well as whether the trading platform is operating as an unregistered exchange.
Obtaining full knowledge about a given trading platform that offers binary options can sometimes be relatively difficult. The best thing you can do is to check if the exchange is registered in the United States and if it is regulated. A list of designated contract markets (DCMs, otherwise known as exchanges) that are regulated by the CFTC can be easily found on their website. It is worth noting that some DCMs are authorized to issue futures or options contracts based on underlying commodities, instruments or indices, under the regulatory supervision of the CFTC.
Binary options scams
Due to the large number of unregistered and unregulated binary options brokers that register their platforms outside of the US, many undesirable practices occur. The owners of such exchanges offer easily accessible online transactions, and as a result, many traders are being scammed by dishonest providers. Increasingly, you can hear about the ever-increasing number of fraudulent practices related to binary options exchanges registered outside the United States that offer their services to US traders. However, if you are a conscious participant in this sector, you will know what to watch out for in order to avoid fraud related to these financial instruments.
Binary options tips
How to avoid falling victim to binary options scams
Below you will find some simple advice to follow to trade binary options legally and safely:
- Carry out financial operations only on platforms that are regulated by the CFTC. Also, remember to be very careful with exchanges that provide services outside of the United States.
- Definitely avoid any cooperation with entities that claim to be regulated entities in conditions where the company is unable to prove the appropriate license. Do not use, also contacts with entities claim that they can manage trading on your account. Some unregistered exchanges that are run by dishonest people may try to contact you through social media offering such practices. It is worth bearing in mind that currently the number of such behaviors is significantly increasing.
- Always follow the rule to be the sole custodian of your account. In particular, never give access to your account to anyone claiming to be a licensed broker who can manage your funds.