Binary options on financial instruments proved of little economic value and are not considered an investment in the U.S. and the European Union.

The claim has two parts: (a) binary options on financial instruments proved of little economic value; (b) they are not considered an investment in the US and the EU. True: regulators' records show both parts. For example, US regulators (SEC/CFTC) warn about or restrict retail binary options and treat them as gambling-like rather than as investment products, and ESMA prohibited their marketing to retail clients in the EU in 2018 (made permanent by national regulators), on the grounds that they offer little investment value. Mostly true: the substance holds, but a detail is overstated, e.g. the US still permits regulated exchange-listed binary options (Nadex/CFTC) even though they are not treated as conventional investments, or the EU ban covers only retail clients. Mixed: one part holds and the other does not. Mostly false: regulators restrict them in some way but formally treat them as financial instruments or investments in both jurisdictions, and the 'not an investment' framing distorts this. False: binary options are recognized and treated as ordinary investments in both the US and the EU, with no such regulatory finding.

Set before the research began.

1. E1 FREQUENTLY ASKED QUESTIONS: ESMA's product intervention measures in relation to CFDs and binary options offered to retail investors European Securities and Markets Authority (ESMA) · 27 March 2018

   “Due to the characteristics of binary options, retail investors on average lose money with these products and there is no clear alternative investment purpose for them (e.g. hedging of risk).”

2. E2 ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors European Securities and Markets Authority (ESMA) · 27 March 2018

   “the particular features of CFDs – excessive leverage – and binary options - structural expected negative return and embedded conflict of interest between providers and their clients; the disparity between the expected return and the risk of loss”

3. E3 Decision - 2018/795 - EN - EUR-Lex EUR-Lex (Publications Office of the European Union) · 1 June 2018

   “European Securities and Markets Authority Decision (EU) 2018/795 of 22 May 2018 to temporarily prohibit the marketing, distribution or sale of binary options to retail clients in the Union”

4. E4 Investor Alert: Binary Options and Fraud | Investor.gov U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) · 6 June 2013

   “For example, some binary options may be securities. Under the federal securities laws, a company may not lawfully offer or sell securities unless the offer and sale have been registered with the SEC or an exemption from such registration applies.”

ESMA found that retail investors lose money on average with binary options, that the products have a structurally negative expected return, and that they have no clear alternative investment purpose (E1, E2). It then prohibited their marketing, distribution or sale to retail clients in the EU, though as a temporary measure (E3). This supports the claim of little economic value and broadly supports the EU part, with the ban limited to retail clients. For the US, the SEC/CFTC investor alert (E4) says some binary options may be securities subject to registration, which cuts against the claim that they are not considered an investment in the US, so the US half of part (b) is not shown.