Binary options are banned by most corresponding regulators in the U.S. and the European Union because they are considered gambling devices.

True: as of 2023, binary options are banned or prohibited (at least for retail investors) by most of the relevant regulators in both the US and the EU, and those regulators cite gambling-like features as a reason. Mostly true: there is a ban across the EU (for example, ESMA's 2018 retail ban and the national measures that followed it) and broad restriction in the US, with a minor discrepancy, such as a US ban only on unregistered or off-exchange binary options while exchange-traded ones are allowed, or a stated reason of investor protection rather than 'gambling' as such. Mixed: binary options are banned in one jurisdiction (EU or US) but are legal and regulated in the other. Mostly false: there are only partial restrictions in both and no general ban. False: binary options are not banned in either jurisdiction.

Set before the research began.

1. E1 ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors European Securities and Markets Authority (ESMA) · 27 March 2018

   “Binary Options - a prohibition on the marketing, distribution or sale of binary options to retail investors; and”

2. E2 FREQUENTLY ASKED QUESTIONS European Securities and Markets Authority (ESMA) · 27 March 2018

   “Economically, binary options are inherently like gambling products which are not suitable for the purpose of hedging or for other economic functions that could form a compensating benefit.”

3. E3 Product intervention Autoriteit Financiële Markten (AFM, Netherlands)

   “Binary options are high-risk products, which almost always lead to losses in the long term. Therefore, there is a ban on selling binary options in or from the Netherlands to retail investors.”

4. E4 Beware of Off-Exchange Binary Options Trades U.S. Commodity Futures Trading Commission (CFTC)

   “Binary options are legal and available to trade in the U.S. but they must be traded on a regulated U.S. exchange.”

ESMA banned the marketing, distribution and sale of binary options to retail investors (E1) and described them as "inherently like gambling products" (E2). The Dutch AFM also bans selling binary options to retail investors in or from the Netherlands (E3). In the US, the CFTC says binary options are legal but must be traded on a regulated US exchange (E4), so only off-exchange trading is barred. The criteria name exactly this US situation, where exchange-traded binary options are allowed, as a minor discrepancy that still counts as mostly true.