Thaxton, MS asked in Business Formation, Business Law, International Law and Securities Law for Mississippi

Q: I'm a US citizen and I want to trade CFDs any workaround to do this legally? Would an offshore company approach work?

It's important to note that I technically wouldn't be trading it. It would be in a brokerage and then a company would be doing the trades for me, both of which are outside of the USA. So basically can I legally have my money go into CFDs and then the profit go back to me.

1 Lawyer Answer
James L. Arrasmith
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  • International Law Lawyer
  • Sacramento, CA

A: Trading Contracts for Difference (CFDs) directly is not permitted for US citizens through domestic firms due to strict regulations set by the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). These regulations aim to protect investors from the significant risks associated with trading these complex financial instruments. As a result, many US traders look for alternative methods to participate in these markets.

One approach that some consider is setting up an offshore company to trade CFDs through brokers located outside of the United States. This method involves establishing a legal entity in a country with more permissive regulations regarding CFD trading. The idea is that the offshore company, rather than the individual, engages in trading, potentially circumventing the restrictions placed on US residents.

However, this strategy carries significant legal and financial risks. It may expose you to regulatory scrutiny and could involve complex tax implications. Moreover, the legal framework governing such activities is intricate, and failing to comply with US laws and regulations can lead to severe penalties. Before considering such a strategy, it's crucial to seek advice from legal professionals who understand both the US and international financial regulations. They can provide guidance tailored to your situation, helping ensure that any investment strategy you pursue is both legal and aligned with your financial goals.

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