Spotlight on Marijuana-related Investments, Binary Options, and Digital Currency
WASHINGTON (November 9, 2015) – The North American Securities Administrators Association (NASAA) today issued an advisory reminding investors to be cautious when considering investing in three products recently making news: marijuana-related investments, binary options and digital currency.
“At first glance, these products appear to have no real connection to one another. But what they all have in common is their recent emergence as three investments that both sellers and buyers hope will become the ‘next big thing.’ Before you consider investing, make sure you understand what these products are, their benefits, and their risks,” said Judith Shaw, NASAA President and Maine Securities Administrator.
The advisory includes information to help investors better understand each of these products, including their risks.
As more jurisdictions clarify their legal definitions on the growth and use of medical and recreational marijuana, an increasing number of companies focused on the marijuana industry are seeking funds from investors. The advisory notes that marijuana investment opportunities could be particularly susceptible to ‘pump-and-dump’ scams in which promoters use misinformation to pressure investors to get in on the ‘ground floor’ thereby inflating the company’s share prices before the shares are sold by the promoters.
A binary option contract is based on the investor’s prediction of an underlying security’s value at a predetermined date. There are only two possible outcomes: the investor may receive a fixed amount of money for guessing correctly, or lose the entire investment for guessing incorrectly. Binary options are simplified options contracts that look more like online gambling than a traditional security or investment, according to the advisory.
Bitcoin and other digital currency remain in the headlines as new exchanges emerge claiming to be licensed and regulated by federal, state, or jurisdictional financial authorities and a growing number of brand-name retailers accepting digital currency as payment for goods and services. Since different countries and jurisdictions have little uniformity on how Bitcoin and digital currency is regulated, scammers will take advantage of the confusion and contradictions to misinform potential investors,” the advisory said.
“The bottom line is that before making any decisions with your money, ask questions, make sure you understand the risks, and check with your jurisdiction’s securities regulator before you invest,” Shaw said.
The advisory as well as contact information for all state, provincial and territorial securities regulators is available on the NASAA website at www.nasaa.org.
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Bob Webster | Director of Communications