Australian financial regulators accuse eToro of violating regulations with its contracts for difference products, resulting in losses for tens of thousands of users

ChainCatcher news, the Australian Securities and Investments Commission (ASIC) has filed a lawsuit against the multi-asset investment platform eToro for offering Contracts for Difference (CFD) products to retail investors, arguing that its market positioning is too broad and violates design and distribution rules.

ASIC stated: "The CFDs offered by eToro are high-risk and volatile, and the platform's target market screening tests did not properly exclude unsuitable customers from trading this product; from October 5, 2021, to June 14, 2023, nearly 20,000 of eToro's customers incurred losses in CFD trading."

It is reported that Contracts for Difference are leveraged derivative contracts that allow buyers to speculate on the price movements of underlying assets, such as foreign exchange rates, stock market indices, individual stocks, commodities, or cryptocurrencies. eToro's cryptocurrency CFDs allow for leverage of up to two times on certain assets, while others involve stocks, currencies, commodities, and precious metals.