IN-DEPTH 20 January 2016
Does binary trading equate to gambling?
Marc Kenigsberg addresses a common question relating to binary options trading
By Marc Kenigsberg
Since I got involved in the world of binary options trading three years ago, I have wondered and been asked countless times whether binary options is in fact gambling. In this article I address this question and try and present a definitive answer once and for all.
Before we can address the issue at hand we need to have a clear understanding of what gambling actually is. So what better place to begin than with the definition put forward by the Oxford English Dictionary: “To play games of chance for money”.
This definition is in line with regulations we have seen over the years in online gambling where a sufficient element of skill involved in a game was enough to deem it as a skill or non-gambling game.
Let’s have a look at two products related in some way to binary trading and both part of the online gaming community: poker and online forex trading. Both of these are regarded by their proponents as skill-based activities and not gambling in any traditional sense. But both are sometimes referred to as gambling by people outside of the industries. So this raises another key consideration, that of perception. If we take a moment to look past the clinical definition and delve deeper into why this is such a common point of contention, we understand that perception is integral to answering this question.
So now that we have a definition we can move to the nature of the product and try to answer the question. Binary options trading in its simplest form is a bet on an outcome of an event. In this case that event is a stock, currency, index or commodity rising or falling in price. There are two possible positions to take based on the outcome and you either win or lose. Simple. In fact it’s this diverse asset range and simplicity that I believe often leads to the misunderstanding by outsiders of the product. The instrument was made to be simple and it is. Extremely simple, in fact, compared to something like pure forex trading, but we can see elements of similar products within it. There is clearly an element of trading based on the nature of the assets being bet on, while at the same time the Boolean nature of the wager resembles roulette in its simplicity.
So analysis aside, after more than a decade in online gambling and three years as a binary affiliate, what do I think? I actually believe that it is completely unique in its classification and unlike any other skill game or game of chance that we know. I would argue that, unlike other products which are classed by the nature of the wager, the gambling determination of binary is made based on the customer. For someone that understands the true mechanics and treats it as a simplified trading interface based on real world events, it is no more gambling than the stock market. But for a trader that believes it is a 50/50 outcome (it is not, there is a built-in edge or spread) and can simply click up or down with equal chance of winning, then it must be seen to be gambling in its purest form.
Perhaps as a reader this answer doesn’t satisfy your desire for a definitive answer. But after 15 years in this industry and probably more than a hundred discussions on this point, I can confidently say that this
is the nature of the beast.
Jamworx Ltd founder and CEO Marc Kenigsberg has been in the i-gaming industry for 15 years and regularly speaks at and contributes to i-gaming events and publications