Are Binary Options Legal in the USA?
Yes, binary options trading is legal in the United States. There are at this moment no laws both on federal and state level that forbid US citizens from trading binary options online. The financial trading market is regulated and supervised by the U.S. Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission. However, these organizations are very unfriendly towards brokers operating from outside of the US.
The CFTC and the SEC have the task of supervising the financial service market of the United States. The current rules of the SEC and CFTC allow companies and financial service providers to legally offer binary trading services to United States citizens. (Source: BinaryOptions.net)
These organizations are also tasked with awarding valid licenses to safe financial service providers. Licensed brokers are obliged by the law to respect traders’ safety and security. If a broker breaks the strict rules and regulations imposed by these organizations, then it will lose its license and risks heavy fines and even prison sentences on its owners.
However, binary options trading (and financial trading in general) laws are extremely restrictive in the US, meaning that authorities are only willing to offer licenses to a selected few of genuine USA companies such as NADEX. At this moment, no offshore broker has a license in the US.
Offshore brokers are in reality not even subjected to US laws, meaning that traders are allowed to register at brokers of this kind. Sure, authorities and operators like NADEX might not like this but they have no legal means of prohibiting traders from trading at offshore brokers and offshore brokers from accessing the US market.
The biggest disadvantage regarding the binary trading laws in the US is the fact that they’re not very friendly towards offshore companies. Unfortunately US policy in regards to financial services is extremely protectionist and as such national regulators are not that keen on awarding licenses to offshore companies, even if those companies fulfill all licensing criteria.
Brokers Where Americans can Trade Binary Options
There are basically two types of binary options brokers in the US. The first category is that of offshore brokers that are licensed most commonly in European Union jurisdictions but fulfill all regulatory criteria and safety standards imposed by the laws of the United States. The second is that of binary options brokers located in USA.
The largest category of binary options brokers that accept USA traders are those that are located and licensed in offshore jurisdictions. While located in other countries than the US, these companies still respect all the laws and regulations imposed in their home countries. This means that these companies are safe for US traders as well (but you need to make sure you register at legit European companies through.)
In most cases, these brokers are licensed in a European Union member state and as such already follow a strict set of guidelines and regulations that most of the time are even stricter than those in the United States. So, trading at an offshore licensed broker is actually a better idea than trading at a broker located in the US. Currently the main binary options regulator in Europe is CySEC. (Source: CySEC website)
Most European brokers also offer much better services than genuine US binary options brokers. This is because the diversity of the European market is much bigger than that of the US. Due to the fact that the CFTC only licenses a limited number of genuine US brokers, the internal competition is extremely weak.
Again, we’d like to point out that trading at brokers that are licensed elsewhere than the US is perfectly legal and often even safer than trading at brokers located on the US. This is because most European states have stricter rules than the US in regards to financial trading. It is however illegal for non-CFTC licensed binary options brokers to solicit the registration of USA traders. So, if something goes wrong it’s the brokers’ that will bear the liability and not the traders. So far only one offshore broker was busted by the CFTC, which was Banc de Binary.
BDB was busted because it lied about having a USA license and an office in the United States. While it seems that the CFTC is tolerating some offshore brokers that do not actively advertise in the US, what Banc de Binary did was clearly over the limit and blatantly illegal.
Brokers that are located in the US
At this moment there’s only a limited number of genuine USA based companies that offer binary trading services. This is not because only small number of operators manage to successfully apply for a license, but because the current binary options laws in the USA aren’t yet that well established. At this moment only NADEX has an actual USA license. Any other broker that says that it’s licensed in the USA is lying.
It’s however expected that in the near future the US would implement a new set of laws and regulation that would enable the CFTC to award much more licenses to both domestic and offshore companies. Once this happens, all those USA binary options brokers that at this moment operate from Europe will most likely instantly apply for a US license as well. (Source: Forex Magnates)
Finding the Best Brokers for US Traders
So, we already established that the brokers that offer the best services for US traders are those that are located in other countries, preferably in Europe. However in order to determine which are the best, we’ll have to evaluate several more criteria.
Does the broker have a valid license
The first thing to check on a financial service provider is if it has a valid license. The most important thing to remember here is that licenses issued by a European Union member state offer the best protection. Cyprus is at this moment the principal regulator of binary trading in the EU. The best brokers usually also have a license in the UK.
Again, remember that the online trading laws of most EU member states are actually much better than those of the US. So trading at EU-licensed brokers actually comes with more advantages than trading at a USA licensed binary options broker.
Online trading software employed
You also have to make sure that the broker of your choice uses a professional and user friendly trading platform. The trading platform is the backbone of the broker; if you trade on a poorly made platform then you won’t be able to evaluate the markets efficiently and may commit mistakes that otherwise would have been avoided.
The software used also determines the extra features offered by the broker such as flexible expiry times, large variety of options, bonuses, charting tools and much more. A basic platform, on the other hand, only provides very basic features and as such trading can become very boring after a while.
Assets and contract types provided
A top USA binary options broker should provide a large number of assets. It’s very important that the asset list of such brokers cover a lot of choices from the United States such as the USD combined with other currencies and stocks of a lot of genuine American companies.
Another important criterion is that of the type of the contracts provided. The most popular contracts offered in the industry are high/low options however the best brokers also provide other choices as well such as range options, touch contracts and 60 seconds contracts.
Competitive payouts and bonuses
As you probably already know, you’ll be making profits in financial trading by correctly predicting the movement of an asset during a certain period of time. In these cases the profit will be calculated using a payout rate. If, for example, you trade $200 on an option that promises a payout rate of 90%, then in the case of success you’ll be rewarded with $380.
What this means is that you should always choose those US friendly binary options brokers that offer the largest payout rates. There’s no real advantage to a broker with a low payout rate, unless that broker offers some very new and fancy features that offer traders a significant competitive advantage.
Toplist of the Best Binary Options Brokers for USA
Based on the criteria described above we compiled the list of operators that you can see on the table on this page. In our opinion these are the best service providers at this moment on the market. We’ll constantly checking new brokers and as such the toplist you’re seeing here is always up to date with the best that the market has to offer. Please keep in mind that these brokers are not licensed in the United States.
CTOption – The reason I like CTOption so much is because it has one of the best trading interfaces in the business with a massive number of charts and extra features. The broker is also known for processing payments very fast and hassle-free.
Finpari – Finpari is a new binary options broker that offers one-hour (!!!) withdrawals as well as deposits made with PayPal. The broker has long-term options and offers a 10% cash-back on losing trades as well.
Check out the reviews related to these top binary options brokers in order to learn more about them and figure out which one suits your needs the most. We also advise you to read our additional articles and guides related to options trading in case you’re interested in becoming a winning trader.
For international readers you can check out my page about binary options brokers in general, which does not focus specifically on the US.