In a dramatic move, the preliminary investigations by the Judge of Rome, on the order of the Public Prosecutor of Rome, under request from Italian financial regulator Consob has directed Italian ISPs to block numerous binary options cites from appearing in Italy. Banned sites are ipotion.com, tradersmarter.com, bocapital.com, eztrader.com, startoptions.com, and anyoption.com.

According to the reports that were first posted by Italian language news sites late last month, Consob believes that binary options closely could resemble gambling and are the aforementioned firms are not in compliance with Italian financial rules due to the way the product is marketed.  Additionally, as binary options are defined as a regulated instrument under MiFID rules, offering the product requires approved EU regulation which these firms fail to have.

Speaking on the matter, Lawyer Fulvio Sarzana, whose firm Sarzana and Partners works on behalf of Italian internet service providers, and has also posted about the subject, said “Consob believes that binary options are more similar to gambling than to financial services.” He added that “Financial watchdogs in Italy had made complaints last year about binary options trading,  which led to warnings,  but these notices seems to be ignored by companies.” When asked of whether the current list of firms is final, and whether other binary options companies that are marketing in Italy are at risk of having their websites blocked, Sarzana answered “this is probably just the first step and I would be willing to bet that more binary options companies will be effected.”

This isn’t the first time that binary options are coming under scrutiny from regulators. Last year we saw the Japanese FSA send a note to brokers to suspend the marketing of new binary brands during the period that the regulator was working to create laws to govern the product. Also, in conduct similar to the current Italian policies, the Turkish Capital Markets Board had published a document in June 2012 that accused several binary options brokers of criminal activities and had ISPs block their IPs into Turkey.

As such, with the prevalent gambling like marketing promoting the binary ‘win or lose’ payout, it’s only a matter of time before more regulators receive complaints from clients and begin to become more proactive in preventing unregulated firms from marketing in their countries.  Specifically, France and Spain have issued warnings to firms in the past which could prelude to additional moves now that Italy has set a precedence within the EU.  Also, as mentioned above, companies marketing in Italy, but that were unaffected by this wave of ISP blocking are vulnerable to further actions.

(update-previously this post was written to reflect that the EU had yet to make a formal decision on binary options, when in fact it had been ruled that the product falls within the definition of financial instruments under MiFID)