I am not a Lawyer and by no means is this any type of legal advice but just searching thru the CTFC and SEC web sites this is what i have gathered, if I am wrong please correct me.
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.
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.
This however does not mean that offshore brokers are illegal 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 traders. 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 though those companies fulfill all licensing criteria.
USA Friendly Binary Options Brokers
There are basically two types of online trading 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 financial trading 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 by the US CFTC. This way the CFTC kind of tolerates their presence (because it has no legal means of prosecuting them) even though it has not awarded them a license.
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.
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, I’d like to point out that trading at brokers that are licensed elsewhere than the US is perfectly legal.
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.
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 receive a US license as well.
Hit me up on skype at Brymcafee (McAllen TX)