European Gaming Lawyer magazine Autumn 2015 | Page 26

The Netherlands:

New licensing jurisdiction for
binary options brokers?
By Frank Tolboom

Frank Tolboom

It goes without saying that the global binary options
market has grown rapidly over the past few years. A
much debated topic about this product has always
been whether binaries should fall under the remit
of gambling or financial services regulators. Apart
from similar product and market characteristics,
these discussions have been further fuelled by the
increasingly pervasive presence of binary options
brokers at the world’s major gaming conferences
and affiliate shows as well as the recent acquisitions
of TradeFX and Plus500 by online gaming software
supplier Playtech. The classification of binary options
as either a gambling or financial product obviously
has implications in terms of licensing and taxation.
Moreover, a significant advantage of financial services
over gambling services is that financial services
companies are able to “passport” their financial
services throughout the EU and EEA, in a way online
gambling operators cannot.
A broader debate has reached this stage in the
Netherlands where the Netherlands Authority
for Financial Markets (“AFM”) refused to grant a
financial licence to a binary option broker established
in The Netherlands because, inter alia, the offering
of binary options would also amount to a game of

26 | European Gaming Lawyer | Autumn Issue | 2015

chance for which an additional gambling licence
would be required. Since no remote gaming licenses
are (currently) available, the offering of binary
options would be in violation of Dutch gambling laws
which, according to the AFM, would undermine the
reputation of the financial market and the integrity
of financial services firms. In a ground-breaking
ruling (“Optieclub-case”) a Dutch court rebuked
the decision of the AFM and, in summary, held
that the Markets in Financial Instruments Directive
(Directive 2004/39/EC, hereinafter “MiFID”) does
not leave room for the AFM to refuse the financial
licence application on those grounds put forward by
the AFM. Consequently, the AFM was forced to issue
the financial licence to the binary options broker in
question notwithstanding the fact that binary options
have not been explicitly regulated at a local level.
“Optieclub”-case

Background
The Netherlands has not specifically regulated binary
options as financial instruments (nor gambling)
contrary to jurisdictions such as Denmark, Italy, Malta
and Cyprus which transposed MiFID into local law
by classifying binary options as financial products.