The Financial Conduct Authority is investigating 94 firms which may be offering binary options in breach of new Mifid II rules.
Since 3 January the regulator has taken over the regulation of binary options from the Gambling Commission as part of the introduction of the new European regime and means firms offering this service must be authorised.
The FCA has today published a list of 94 firms without authorisation which it understands are offering binary options trading to UK consumers.
The list is based upon information the FCA has received from consumers, partner agencies and from monitoring the binary options market.
In a statement the FCA said: "Many of these firms claim to be based in the UK but the FCA believes that most of the addresses they provide are false and that the firms are actually based overseas.
"The FCA is examining each of these firms to determine whether any are genuinely operating from within the UK.
"If they are, the FCA will consider taking enforcement action through the courts to stop their illegal activity."
Binary options allow an investor to make a bet on the price of value of a stock, commodity, currency, index or anything capable of being measured in financial terms.
The time periods involved tend to be very short, ranging from between 30 seconds to five minutes.
The FCA's research on this area found the majority of consumers who invest in binary options lose money and find it hard to make sustained profits over a series of bets.
It has also pointed out that in most cases, the firm a consumer buys options from benefits when they lose.
This means the firm's interest is in direct conflict with the consumer and increases the risk of poor conduct by firms offering these products.
The European Securities and Markets Authority is considering a ban on the marketing, distribution and sale of binary options to retail clients.
The FCA is not the first government agency to warn about binary options.
Action Fraud, which is part of the City of London Police, issued a similar warning last year.
It said binary options was a "growing problem", with £18m lost in the first half of 2017 alone.
The FCA list can be viewed here.