Last week ESMA announced its new measures on the provision of binary options and contracts for differences (CFDs) to retail investors in the European Union. In this article, we would go through the decisions taken, that will be implemented during the summer, and try to assess their impact.

Binary options in Europe: what is changing on July 2?

As per this official document, “ESMA Decision 2018/796 provides for restrictions in relation to marketing, distribution or sale of contracts for differences (CFDs) to retail clients. ESMA published a notice (ESMA35-42-1135) to this effect on its website on 1 June 2018. ESMA Decision 2018/796 will enter into application two (2) months after its publication in the Official Journal of the European Union.”

The aim is ‘to protect EU consumers”. But is it really the case? We do not think so, as:

  1. Offshore brokers won’t be impacted by the advertising ban and other restrictions.
  2. There is no strict definition or “retail investor”. Therefore binary options are not really banned in Europe, it depends which boxes the user ticks when registering on the trading platform.
  3. There are a lot of other products that can lead to big financial losses (casino games, sports betting, lottery, poker, etc.), those can be advertised aggressively.

With those measures, ESMA will maybe hurt binary options in Europe, but it won’t solve the problem. Yes, you can lose a lot of money in binary options. In leveraged trading. But you can also lose a fortune at the casino, on the football game, in a poker game, in scratching cards. Those products are used by way more “retail investors” than binary options. The turnover of these industries are way bigger, people lose much more money on football betting or casino games. Gambling addiction goes far beyond binary options, so why targeting this sector and not the others? Because gambling is heavily taxed?

READ  Spectre Incentive Program : earn $1.000 weekly and/or $50k yearly

The companies offering sports betting, casino games and those kind of products run aggressive marketing campaigns to attract new customers. 100% bonus (but they impose an important turnover, which means that in many instances you lose the money by then), free bet bonuses… you have seen such promotions. In England, newspapers cover extensively the stories of the jackpot winners of Camelot, posing with their huge checks.

bet McLean bonus

Don’t take us wrong, we are not suggesting that any kind of betting should be banned. Yes, gambling addiction is an issue that has to be tackled. But in the case of binary options, the ESMA measures, beside hurting companies based in Europe, won’t help much.