Russia set to regulate binary options as gambling products – Central Bank report indicates

Maria Nikolova

Whereas Europe and Canada have moved to ban offering of binary options to retail clients, Russia appears to be seeking a milder way to regulate these instruments.

While Europe awaits the entry into effect of the ban on offering of binary options to retail investors, Russia appears to have adopted a different approach. The Annual Report for 2017 of the Central Bank of Russia indicates that the Russian authorities view binary options as gambling instruments and work on a legislative piece that will regulate them as such.

In its report, the Central Bank says it has actively participated in the drafting of the bill on “Amendments to the Federal law on Securities and other legislative acts of the Russian Federation”. The bill envisages rules for the contracts involving binary options. The entry into such contractual arrangements will be allowed only between individuals and organizers of gambling activities solely in casinos and gaming spaces located in special zones assigned for gambling.

The Central Bank gives no more information on the plans in this respect.

In July last year, Valery Lyakh, Head of the Bank of Russia’s Department for Countering Malpractice, has indicated that some measures to tackle binary options fraud were on their way.

Back then, Mr Lyakh confirmed that the Bank of Russia is getting numerous enquiries about binary options from police officers from across the Russian Federation. However, Mr Lyakh conceded that thus far the Central Bank has not closed any binary options website, based on the fact that a website offers binary options, as the powers of the regulator do not spread over this type of instruments.

According to estimates by the Russian edition of Forbes, Russia generated 29% of the traffic to four of the biggest binary options websites in April 2017. Forbes based its estimates on data derived from SimilarWeb.com. The data show that in April last year, the four platforms in question had more than 50 million visits. This means that Russia accounted for 14.5 million of them.

If Russia labels binaries as gambling instruments, then binary options advertising is also set to be allowed.

Let’s recall that on March 28, 2017, Russia’s president Vladimir Putin signed quite an interesting bill into a law. The document concerns advertising of gambling/gaming activities in Russia, and sports partnerships in particular.

The document introduced amendments to several Russian laws. There are amendments to the law on advertising which permit advertising of all sorts of bets, gambling and gaming, during TV airing of sports games, racing, competitions, matches, etc., as long as this type of ads do not account for more than 20% of the permissible total duration of ads. Such type of advertising is permitted in all sorts of print media and periodicals dedicated to sports; also on Internet sites for sports. Advertising of bookmakers, providers of gaming/gambling services, is allowed on sports facilities (infrastructure like stadiums, etc.) and on wearables (clothing, shoes, etc) of sports teams and players.

Gambling operators, bookmakers, etc, making use of advertising deals with sports teams, have to allocate funds for sports events and sponsoring the development of sport activities in Russia. The whole sum of allocations (including but not limited to such advertising deals) should be not less than RUB 15 million. According to the document, 80% of the special-purpose allocations by gambling businesses should go for the development of Russian professional sports.

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