Why are Leveraged and Futures Trading Considered Haram in Islam? How Can Binance Address This?

There are approximately 1.9 billion Muslims worldwide, many of whom are interested in trading. However, certain trading modes are considered Haram (forbidden) under Islamic law. While some platforms claim their services comply with Sharia law, this is often not the case. As a Muslim, I have personally researched and consulted with Islamic authorities to provide a clear explanation for both traders and Binance.

Forex, margin, and futures trading are deemed Haram in Islam for two main reasons. If Binance addresses these concerns, they could potentially open their services to the vast Muslim community.

1. Leverage:

Leverage is considered Haram because it involves borrowing money, with the platform profiting from lending to traders. However, profit-sharing models are permissible. To comply with Sharia, Binance could charge fees only on successful trades, while no fees are applied to unsuccessful trades. The platform could set higher fees on successful trades to cover the overall costs, creating a win-win solution.

2. Margin and Futures Trading:

These are considered Haram because, in Islam, it is forbidden to sell something you do not own.

To address this, Binance could transfer the leveraged amount directly into the trader’s account for the purpose of opening a trade, with the amount being returned after the position is closed. This process could be locked in a way that ensures the funds are used solely for trading.

While spot trading is considered Halal, it is often less profitable than futures trading. By finding solutions to these issues, Binance could offer Islamic-compliant trading options and cater to a massive, untapped market of 1.9 billion people.

Feel free to share your thoughts on how we can make trading more inclusive!

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