Spread betting is typically considered to be a form of financial speculation, very much like purchasing a stock. And just like a stock exchange, spread bettors conduct their transactions via an online or mobile platform, placing orders to obtain a certain financial position.
But spread betting is different from most forms of trading in one major sense; you never actually take possession of the stock, commodity or currency you trade. Instead, you’re simply placing a wager on how that market will move.
In many ways, spread betting is more similar to various forms of gambling, like sports betting. Rather than owning a piece of a company and seeing your financial fortunes rise and fall in tandem with the stock price, you are betting on an outcome, not unlike that of a football match.
Consequently, spread betting is not universally legal. Because it is technically a form of betting, rather than trading, it is considered to be a form of online gambling. In countries where all forms of online gambling is prohibited, so too is spread betting.
Yes. Spread betting is legal in the UK, and in fact, benefits from its domestic classification as a form of gambling. Whereas gains made from traditional forms of speculation are taxed, spread betting profits are exempt from stamp duty and capital gains tax.
Spread betting is also legal in several European countries, as well as Canada and Australia. However, different governments tax the earnings acquired from spread betting in different ways.
The US is the largest market in which spread betting is prohibited. This is because online gambling, such as lotteries or poker, are not permitted. Even though games of skill are sometimes legal, such as daily sports fantasy wagers, and spread betting requires more than luck to profit, spread betting is not allowed for US citizens.
Though US citizens are not permitted to spread bet, it is possible to open a spread betting account. If you open an account with an FSA-regulated provider, you can theoretically have a spread betting account. However, many such brokers will impose geographical restrictions against people from countries in which spread betting is prohibited.