LeapRate Exclusive… LeapRate has learned that Israel’s new Binary Options law, banning the operation of any part of a Binary Options brokerage in the country, will not be passed by the country’s Knesset parliament in time for the plenary’s summer vacation. The Knesset begins its summer break today, July 30.
The earliest that the bill could be passed into law is now the opening of the Knesset’s winter session which opens on October 22. And as laws such as these become effective in Israel three months after being passed, that means that the law can become effective no earlier than the end of January 2018.
We reported at the end of June that the bill, which was jointly drafted by the Israel Securities Authority and the Finance Ministry, received Cabinet approval and a fast track First Reading in the Knesset. After the First Reading was approved in a 31-0 Knesset vote the bill headed back to the Knesset’s Finance Committee for fine tuning and final debate. However the bill’s second and third reading and final vote were not scheduled in time for the Knesset’s Spring sitting which, as noted above, closed today.
Instead, the bill will be introduced to the Knesset’s Reforms Committee, which continues its work even during official Knesset breaks. The Reforms Committee will apparently give any groups opposing the bill, or wanting its wording changed, to present their case before approving the bill for the final readings and vote into law. According to Knesset filings the Reforms Committee will debate the bill this Monday July 31, Wednesday August 2 and Thursday August 3.
As currently worded, the legislation considers the operation of a Binary Options brokerage in Israel – whether targeting Israeli or foreign clients – to be a criminal offense punishable by up to two years in prison. It will also be considered a contravention of Israel’s anti-money laundering (AML) laws, which can carry further prison time and monetary penalties.
The new legislation covers the operation of any part of a Binary Options brokerage: provision of software services required to run a brokerage, provision of payment services for the purposes of binary options trading, the marketing of binary options services, and of course providing any sort of customer service or contact with customers.
There are reports that experienced Knesset lobbyists have been quietly engaged by certain elements of the Binary Options sector in Israel. Those lobbyists have been actively working to slow down the passage of the bill into law (which may have led to the aforementioned delay beyond the Knesset summer break), as well as to amend it such that it doesn’t totally ban the industry, but rather regulates it. The idea is to get the bill to treat Binary Options similarly to Forex and CFD products. The Israel Securities Authority introduced licensing for Forex brokers last year, although those rules cover brokers which engage with Israel base clients.
In the meantime, a number of leading Binary Options companies in Israel have already taken action, viewing eventual passage of the bill as a fait accompli. Some of the platform providers and brokers have moved Binary Options jobs and operations out of the country, while others have “disavowed” Binary Options and are attempting to reinvent themselves as FX, CFD, and/or cryptocurrency brokers and platform providers.
And in the background, an increasing number of lawsuits are being filed against the operators and former operators of Binary Options websites, backed by lawyers and funding groups looking to “go after” the perpetrators of Binary Options fraud.