The Israel Securities Authority, which oversees the country’s financial market, has issued a public warning against a binary options trading platform, Pocket Option, which targets traders in the country.
Binary Options Are Banned in Israel
Once a booming industry, the ISA banned the marketing and distribution of binary options in Israel in March 2016 due to rampant scams, which led such companies to concentrate on selling abroad. The final nail in the coffin came in October 2017 with the ban on international marketing of binary options by Israelis too.
According to the ISA’s latest warning on Monday, Pocket Option has been marketing its services to traders in Israel, which is illegal under the country’s laws. The regulator also highlighted that Pocket Option, an international platform, is “operating without a permit or licence.”
Pocket Option’s website shows that it is operated by an entity registered in Costa Rica. It also states that it “does not provide service to residents of the EEA countries, USA, Israel, UK and Japan.”
Simple, Yet Too Risky
Binary options are derivatives that allow traders to speculate on whether the value of the underlying asset will go up or down within a specified time frame, ranging from a few seconds to several days. A correct speculation would generate a significant return; however, the trader would lose the entire capital if the market moves in the opposite direction.
Despite the risks, binary options were very popular because of their simplicity. However, the industry was rife with scams, as the platforms offering binary options acted as counterparties to traders. Many of these platforms even manipulated market data to siphon traders’ capital, profiting from them directly.
Under such circumstances, regulators in multiple jurisdictions banned the marketing and distribution of binary options contracts. Israel, which became a hub for such binary options companies, also banned them, and the decision was upheld by the country’s Supreme Court.
Interestingly, the United States is one of the very few jurisdictions that allow the distribution of binary options, but under strict regulations. US authorities are also actively cracking down on multiple illegal binary options operators for fraud.
Meanwhile, another industry, event contracts, has been expanding aggressively. These contracts are very similar to binary options, but instead of financial instruments, they allow traders to speculate on the outcome of events such as elections, sports, or even weather.
The US regulator, the Commodity Futures Trading Commission (CFTC), previously tried to stop the distribution of political event contracts in the country but failed. Recently, it has been targeting sports event contracts and has opened a probe into Crypto.com and Kalshi. Robinhood also suspended the distribution of Super Bowl event contracts after a formal request from the regulator.
This article was written by Arnab Shome at www.financemagnates.com.
Source link
