US Federal Judge: Bitcoin and Cryptocurrency Are Commodities
For the first time, a federal judge has upheld that Bitcoin and other cryptocurrencies are commodities and thus subject to regulation by the U.S. Commodity Futures Trading Commission (CFTC).
Bitcoin & Cryptocurrencies Are Commodities
U.S. Federal Judge from the Eastern District of New York, Jack Weinstein, ruled on Tuesday that cryptocurrencies should be treated as commodities, reports CNBC.
The ruling is a landmark as this is the first time that a court upheld the CFTC’s jurisdictional assertion over cryptocurrencies like Bitcoin. Previously, the CFTC had stated that cryptocurrencies should come under the scope of the commodities regulator.
“CFTC holds that bitcoin and other virtual currencies are a commodity covered by the commodity exchange act,” the agency said in a statement back in September 2015.
Now, the ruling adds some much-needed clarity to cryptocurrency, as well as its related futures and derivatives markets, which launched at the end of last year.
Coin Drop Markets Gets Dropped
The defendant in the given case was Patrick K. McDonnell of Staten Island, New York, and Coin Drop Markets (CDM), a New York corporation, which was never registered with the CFTC.
“The CFTC Complaint alleges that from approximately January 2017 to the present, McDonnell and CDM engaged in a deceptive and fraudulent virtual currency scheme to induce customers to send money and virtual currencies to CDM, purportedly in exchange for real-time virtual currency trading advice and for virtual currency purchasing and trading on behalf of the customers under McDonnell’s direction,” reads the official lawsuit announcement.
The regulator claims that CDM’s customers never received the trading advice they paid for and that McDonnell eventually stopped responding to customers and took down the company’s website.
In result, Weinstein issued a preliminary injunction against the defendant, preventing CDM from further business activity. But more importantly, Weinstein upheld CFTC’s statement from 2015 that cryptocurrencies are commodities, noting that the CFTC had broad leeway in interpreting federal law regulating commodities.
Back in January 2018, CFTC Chairman J. Christopher Giancarlo, told the Senate Banking Committee on cryptocurrency and blockchain regulation, saying:
[T]he CFTC does NOT have regulatory jurisdiction over markets or platforms conducting cash or ‘spot’ transactions in virtual currencies or over participants on those platforms […]
CFTC only has enforcement jurisdiction to investigate and, as appropriate, conduct civil enforcement action against fraud and manipulation.
It appears that is exactly what the CFTC is now doing.
How will this ruling impact cryptocurrency industry? Let us know in the comments below!
Images courtesy of Shutterstock, Wikipedia.org