The Netherlands Authority for the Financial Markets (‘AFM’) wrongly refused to provide a license to a Dutch institution that offers binary option services. This is the outcome of a preliminary judgement earlier this week by the Dutch Trade and Industry Appeals Tribunal (‘CBB’).
According to AFM, the application for a mandatory license to provide to financial products was refused, as offering binary options could be considered as offering a game of chance, which is currently illegal in the Netherlands without a license granted by the Gaming Authority.
As a result, the applicant would have been able to offer an illegal game of chance with a license of AFM, and it could even offer this with a “European passport” in other EU jurisdictions.
The arguments of AFM were denied. Earlier this year, the Dutch court in Rotterdam already decided that the Markets in Financial Instruments Directive (2004/39/EC) prevents AFM to set additional requirements to granting a license.
This means that the question whether binary options should be considered a – legal or illegal – game of chance, is irrelevant if all other requirements for a license have been fulfilled.
In this week’s judgement in preliminary relief proceedings, the earlier judgement was confirmed. AFM already appealed to that judgement. The CBB confirmed that is very likely that eventually the European Court of Justice will have to decide about this issue.