Consultation launched on binary options regulation

The UK government has launched a consultation initiative on the regulation of binary options, an area of growing interest to online gambling companies….witness Playtech‘s acquisition of FXTrade recently (see previous reports)

The main thrust of the consultation, which is being driven by HM Treasury, is on which body should control the new sector, the UK Gambling Commission or the Financial Conduct Authority.

Comments from the public are invited on draft legislative proposals on the subject.

The broader Treasury initiative is aimed at making UK financial markets better by strengthening protection for investors and increasing efficiency through a more competitive environment.

Because of the gambling element (fixed odds betting on financial markets) binary options currently fall under the oversight of the UK Gambling Commission, which has noted that the vertical, whilst growing, still encompasses only around 1 percent of the overall gambling market.

If the decision is made to locate this vertical under the FCA, it will be separated from other forms of gambling, which will remain the purview of the Gambling Commission.

The Commission has already observed that most UK-licensed gambling operators are not offering binary options, and the consultation or any subsequent switch of regulatory authority will not affect them.

Those who do offer binary options alongside more traditional gambling products will find that this part of their operations will be separately regulated by the FCA, whilst other gambling elements will continue to fall under the UKGC.

The launch of the consultation has caused the Gambling Commission to pause its point-of-consumption operator licensing regarding those companies offering binary options until the regulatory issue has been sorted out.

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