The first thing to understand is – are binary options a financial product or a gambling one?
UK consumers who enjoy trading binary options might not know that currently this activity is not an FCA (the UK’s Financial Conduct Authority) regulated one. It is not considered a form of investing and they do not have the standard protections of the UK’s financial services regulatory framework.
At the moment binary options are regulated by the UK’s Gambling Commission instead, but only in the case that the managing company has its remote gambling equipment located in Britain. The Gambling Commission advises that UK consumers should research the market carefully and make a deeper selection process before joining any online binary options broker.
The Gambling Commission cannot offer compensation to consumers if they lose money when engaging with unlicensed operators.
There is not much to do, if the binary options firm has not a remote gambling equipment in Britain, binary options trading will be regulated neither by the Gambling Commission nor by the FCA.
Thing is that other European Union (EU) countries consider binary options to be more a financial product than a gambling one. What happens is that under EU financial services law, firms which are legally established and authorised in one European Economic Area (EEA) country as well as Norway, Lichtenstein, and Iceland, can do business in any other EEA country once certain safety requirements are met – and hence even though the FCA does not regulate binary options, companies from EEA countries which offer binary options trading can freely do business in the UK and for this reason are registered in the FCA Register of financial services firms.
So we have an overall picture in which the FCA does not regulate binary options, but you can trade binary options in UK legally. It ultimately means that you can’t take advantage of the protections offered by the UK’s financial services regulatory framework when purchasing binary options.
The UK Government is currently consulting whether it is the case to treat binary options as a financial rather than a gambling product, so that the FCA can start regulating binary options and offering its protection to UK consumers.
However latest news is that FCA may bring Binary Options under its remit by January 2018, as enquiries to the FCA’s consumer contact centre grew to 17 percent of the total 106,800 enquiries in the period between December 2015 and November 2016.