Trading binary options is legal almost everywhere and at worst it is a grey area in a few countries in which there are no laws that make it expressly legal or illegal.
If anyone was ever under legal scrutiny for binary options it would be the broker giving customers a way to trade that would be under scrutiny not you as an individual trader. No one has ever been charged for trading binary options.
Most government currency binary options brokers get their license and legal status from the Cyprus Securities and Exchange Commission or the Malta Lotteries and Gaming Authority, both of which operate under European Union laws and regulations.
Bitcoin has made these high charging restrictive nation state based authorities redundant and bitcoin only brokers such as FortuneJack (review) can operate safely and honestly with licences that allow them to have anonymous traders which is much better for the traders privacy and security.
Binary option taxes
Only a tax agent in your country can tell you how profits from trading binary options should be reported to the tax man but in most cases it is tax free unless it is part of a business.
There is an interesting debate about whether income from binary options trading should be taxed as gambling income or in the same way as income from investments is taxed or simply as general self-employment income.
Not only does this distinction greatly affect tax rates for winnings but it also determines the ability to claim losses as deductions against other income.
This also raises the awkward question how much of what the city of London and Wall Street traders and hedge fund industry do could also be called gambling as they are all ways of taking an opinion about an uncertain future event and placing a monetary consideration on it with the possibility of profit or loss.
Fortunately with bitcoin we don’t have to worry about being forced to contribute to corporate welfare or the next war.