Is It Halal to Trade on Platforms Guaranteeing Profit Without Loss?

Answered by Shaykh Muhammad Carr

Question

I am seeking guidance regarding the ACCGN trading platform, which uses an artificial intelligence algorithm and claims to provide a guaranteed source of income, where no loss is possible.

My questions are as follows:

• Is it permissible in Islam to use a platform that guarantees profits with no possibility of loss?
• Could such claims involve riba, gharar (excessive uncertainty), or other haram elements?
• Does the use of AI in this context affect whether the trading is deemed halal or not?

Answer

In the Name of Allah, the Most Merciful and Compassionate.

I pray you are in good faith and health. Thank you for your question.

Allah says,

“O you who believe, devour not your wealth between you through falsehood; but only through trade by your complete mutual consent.” [Quran, 4:29]

Given current concerns about ACCGN, it is advisable to exercise caution and conduct thorough due diligence before engaging with the platform.

Guaranteed Profits

Is it permissible in Islam to use a platform that guarantees profits with no possibility of loss?

If the impossibility of loss is contractual, like a loan agreement, then such a guarantee and the contract that houses it are impermissible.

Conversely, suppose the contract does not exclude the possibility of loss. In that case, it is generally considered a risk-sharing model, which is permissible notwithstanding mechanisms that may practically eliminate risk.

The focus would always remain on the underlying contracts facilitated by the platform.

Fixed and Constant Returns: An Obvious Red Flag

The core of the AccGn offer revolves around a fixed daily return: users speak of around 1% per day, with withdrawals every 18 days. At an early stage, to incentivise membership, a monthly return of up to 30% is promised, with no apparent risk. These returns, completely unrealistic in real markets, are a clear wake-up call. Any platform that promises constant returns independent of market conditions potentially falls into the Ponzi scheme model, where returns to investors are only guaranteed through the continuous inflow of new deposits. [decripto.org]

Riba and Gharar Involvement

Could such claims involve riba, gharar (excessive uncertainty), or other haram elements?

This is determined by examining the underlying contract facilitated by the platform. In the case at hand, the contract involves trading in cryptocurrencies and digital assets.

The trading format in cryptocurrencies and forex is similar, even though the underlying assets differ. In both markets:

1. Traders buy and sell currencies (cryptocurrencies in one case, national currencies in the other).
2. Price fluctuations are tracked, and traders aim to profit from these movements.
3. Both markets offer leverage (the ability to control a large position with a smaller amount of capital).

Both instances are a type of derivative trading that allows traders to speculate on the price movements of an asset without actually owning the asset. Hakim Ibn Hizam said: O Messenger of Allah, a man comes to me asking to buy something which I do not have, so I buy it for him from the market? He said: ‘No, do not sell what you do not have. [Abu Dawud]

Using AI 

Does the use of AI in this context affect whether the trading is deemed halal or not?

In the scenario referred to above, AI is allegedly used to facilitate grid trading.

A grid trading strategy is a trading method that involves placing buy and sell orders at predefined intervals above and below a set price, creating a “grid” of orders. The goal is to capitalize on market volatility, as the strategy automatically profits from price fluctuations, regardless of whether the market is trending up or down.

This approach is often used in markets with significant price movements, where trades are triggered by price changes within the grid. It doesn’t require predicting market direction, but rather aims to benefit from regular price swings.

According to the promoters, AccGn would be based on an automated “full-stack AI” system, capable of covering all phases of trading: from data analysis to forecasting market trends to order execution. An autonomous machine, they claim, that promises stable and recurring gains with minimal effort. However, there are no independent or verifiable sources certifying the existence or effectiveness of this technology. No technical publications, no third-party verification. Only general statements with no documentary basis. [decripto.org]

Furthermore:

• AI as a Tool, Not a Sentient Being: It’s accurate to describe AI as a tool, not a sentient being. AI, in its current form, operates based on algorithms, patterns, and data processing, without awareness or conscious thought.
• Imprecision and Uncertainty (Gharar): The idea that AI is not as precise as people may assume is valid. While AI can provide valuable insights, it is still limited by its programming, data quality, and underlying assumptions. These limitations could introduce gharar (excessive uncertainty) into contracts, especially if the reliance on AI leads to unpredictable or imprecise outcomes that might cause unintended losses for the parties involved.
• Jurisdictional Configuration: The call for scholars to create a jurisprudential framework for incorporating AI into contracts is essential. Islamic finance principles, including the prohibition of gharar (excessive uncertainty) and maysir (gambling), require careful consideration when integrating modern technologies like AI into contracts to ensure that transactions are fair, transparent, and avoid risk or uncertainty.

Thus, while AI can certainly enhance efficiency and decision-making, it is essential to address its potential drawbacks within Islamic legal principles to ensure fairness and accountability in contracts. [ChatGPT]

I pray this is of benefit and that Allah guides us all.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Faraz Rabbani

Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefited from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door to students. As an imam, he has the unique opportunity to serve his community in daily life.

In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari‘a Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.