Investors should be wary of ‘next big thing’

Freeman Staff

Nov. 16, 2015

MADISON — The Wisconsin Department of Financial Institutions on Monday issued an advisory to investors to be wary of investing in three new products that have been in the 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,’ ” said Patricia Struck, administrator of DFI’s Division of Securities, in a statement. “Before you consider investing, make sure you understand what these products are, their benefits and their risks.”

As more areas legalize the sale of marijuana, there are more companies seeking funds from investors, according to the announcement. Struck said these requests can be particularly susceptible to scams. A binary option contract is based on the investor’s prediction of an underlying security’s value at a predetermined date. According to the advisory Monday, 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.

In regards to digital currency, Bitcoin is one of the more well known. The trouble with digital currency is that there is no uniformity on how these forms of currency are regulated so scammers can take advantage of the confusion.