The ban on binary options for consumers

Binary options are a bet on whether something will happen: whether a share price, a currency or another market will be above or below a set level at a set time. If the prediction is right, the bet pays a fixed amount. If it is wrong, the whole stake is lost. There is no asset bought and nothing left over.

They were banned for sale to UK consumers in 2019, and that ban still stands. Any firm offering binary options to a UK consumer today is almost certainly unauthorised, which means it has no permission from the Financial Conduct Authority and none of the protections that come with it. A consumer protection review found three adverts for binary options still running in December 2022, describing them as "a form of trading banned in the UK in 2019"¹.

That matters because the money is usually gone. Investment losses are not normally covered by compensation, and you will not be compensated simply because an investment falls in value or a company goes bust, unless poor performance resulted from bad advice by a regulated adviser that has since gone bust². With binary options there is no underlying asset to recover, so the loss is the stake itself.

What binary options are: a bet on whether an event happens

A binary option is a contract with two possible outcomes. You put down a stake, you predict whether a named event will happen by a named time, and the contract settles one way or the other. There is no share, no bond and no property changing hands. The closest familiar comparison in regulated markets is a contract for difference, which the House of Commons Library describes as "essentially a bet rather than the purchase of an asset, and often involve borrowing money"³. Binary options sit in the same family: a wager dressed in the language of trading.

That framing is why the product was so heavily marketed. It looks like investing, with charts and platforms and account balances, but the mechanics are closer to a coin toss with a payout attached. The all-or-nothing structure is the defining feature, and it is also what makes the product unsuitable for most consumers: there is no partial recovery, no dividend, no long-term growth to wait for.

If the prediction is wrong, the whole stake is lost

The risk in a binary option is not that the value falls a bit. It is that the entire amount put in disappears. That is a different shape of risk from most investments, where a bad year means a smaller pot rather than an empty one. The Financial Conduct Authority's own risk wording for speculative products makes the point bluntly: "If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail"⁴. The same all-or-nothing logic applies to a binary option, except there is no business behind it at all.

Investment firms themselves use similar language. HSBC tells customers "you could get back less than you invest"⁵, and Aegon says "You could end up less than you invested"⁶. The Association of Investment Companies is more direct: "In extreme circumstances you could even lose all your money"⁷, and "Investing in the stock market is risky. When you invest you could lose money"⁸. Those warnings are written for ordinary investments. A binary option is more exposed than any of them, because the outcome is binary by design.

Who oversaw binary options before the ban

Before 2019, binary options sat inside the financial system rather than the gambling system. Dealing in investments is a regulated activity in the UK, so trading platforms required authorisation from, and were regulated by, the FCA³. That meant a firm selling binary options needed permission, and consumers who dealt with an authorised firm had access to the usual routes: a complaint to the firm, then to the Financial Ombudsman Service, and in some cases compensation.

The ombudsman still sees cases that involve compulsive spending or gambling harm across "loans, mortgage extensions, pensions used for gambling, high-risk investments, general banking including account support"⁹. That range shows how losses from speculative products tend to spread: they start as one payment and end up as borrowing, missed mortgage payments or raided savings.

The distinction between authorised and unauthorised matters more than almost anything else on this page. If a firm was authorised at the time it gave advice or sold a product, there is a route to complain and, in narrow circumstances, to claim compensation. If it was not, those routes generally close. The Financial Services Compensation Scheme will only help with pension transfer advice claims where "The adviser must have gone out of business for us to be able to help. It also must have been regulated by the Financial Conduct Authority at the time it gave the advice"¹⁰. The same principle runs through the scheme's wider coverage: the firm must have gone out of business and must have been regulated by the FCA at the time it provided the service¹¹.

Is a binary option the same as fixed-odds betting?

In shape, yes. Both involve staking money on an outcome, with a fixed return if the prediction is right and nothing if it is wrong. The difference is the wrapper. Binary options were marketed as a way to trade financial markets, which put them under financial rules and the FCA. Fixed-odds betting sits under gambling rules, and the rules on fixed odds betting terminals are currently under review, with debate about limiting the amount that can be wagered in each transaction¹².

That split matters for where a complaint goes. Gambling complaints follow gambling routes. Complaints about financial products, including high-risk investments, go to the Financial Ombudsman Service⁹. If a firm was never authorised to sell the product in the first place, neither route may help, which is why the ban exists: it removes the product from the authorised market altogether.

There is a second comparison worth drawing. Bonds sold inside a pension or investment account carry a warning that "your capital is at risk if the borrower defaults on the loan"¹³. Even a regulated income product can lose money. A binary option goes further, because the loss is built into the structure rather than being a risk that might not materialise.

What to do if a firm still offers you binary options

The first step is not to send money. Check the firm on the Financial Services Register and against the FCA Warning List before any payment, and treat an unsolicited approach about binary options as a warning sign in itself. If money has already gone, contact your bank immediately: payments can sometimes be blocked or recalled if they are reported quickly, and the same advice applies to gift card scams, where contacting your bank and the gift card provider straight away can sometimes allow the card to be blocked¹⁴.

If the firm turns out to be unauthorised, the usual refund and compensation routes may not be available. That is the practical consequence of dealing outside the regulated system, and it is why speed matters more than anything else once a payment has been made.

Where to get help if you have lost money on binary options

Start with the firm, if it was authorised. If the complaint is not resolved, the Financial Ombudsman Service can look at cases involving high-risk investments and gambling-related harm across a wide range of financial products⁹. If the firm has gone out of business and was regulated by the FCA at the time, the Financial Services Compensation Scheme may be able to help, though it will not compensate for an investment simply falling in value².

If the money was paid by bank transfer to an unauthorised firm, the position is harder. Banks and payment services providers are allowed to block payments and freeze a current account if they suspect it has been used as part of fraudulent activity, for money laundering or other illegal activity, or if a court orders them to do so¹⁵. That power protects the system, but it does not create a refund right where none exists.

For debt problems that follow a loss, free help is available. StepChange advises keeping up payments even if an offer to creditors was rejected, because "The people you owe should still accept the payments and update your account"¹⁶. The government's Housing Loss Prevention Advice Service offers free legal advice for people facing possession proceedings¹⁷. For anyone in Scotland, the Minimal Asset Process is a form of bankruptcy that requires advice from an approved money advice organisation before an application is submitted to the Accountant in Bankruptcy¹⁸.