Category Archives: commodities

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US District Court Rules CFTC Has Jurisdiction over Crypto

On 26 September 2018, Judge Rya W. Zobel of the US District Court of Massachusetts ruled that the Commodities Futures Trading Commission (CFTC) has jurisdiction to regulate all cryptocurrencies as commodities. This critical ruling was issued in response to a motion by My Big Coin to dismiss a case against them by the CFTC, on the grounds that the My Big Coin cryptocurrency was not a commodity.

The US District Court used a relatively broad definition of commodities to reach this decision. It says that commodities are all goods, articles and service rights and interests for which there are contracts for future or present delivery. The court references how the fact that Bitcoin has future markets factored into this decision.

The Director of CFTC Enforcement, James McDonald, says, “This is an important ruling that confirms the authority of the CFTC to investigate and combat fraud in the virtual currency markets. This ruling, like the one in McDonnell from Judge Weinstein in the Eastern District of New York, recognizes the broad definition of commodity under the Commodity Exchange Act (CEA), and also that the CFTC has the power to prosecute fraud with respect to commodities including virtual currencies. We will continue to police these markets in close coordination with our sister agencies.”

Simultaneously, the Securities and Exchange Commission (SEC) has previously declared that almost all cryptocurrencies are securities. The SEC says that any crypto which an investor buys in expectation of future profit is a security, if profits go to a centralized organization. The SEC says that only Bitcoin and Ethereum are decentralized enough not to be considered securities.

The end result is a hostile situation where most crypto companies can be regulated by the SEC and CFTC, as both commodities and securities. The reality is Bitcoin and other cryptocurrencies are an exotic new hybrid of commodities and securities, and there are discrepancies and irregularities should states regulate cryptocurrencies like traditional financial assets. Some industry commentators feel it would be best if a new government agency were created to regulate the crypto space, with the power to override decisions by the SEC and CFTC to ensure fair treatment of crypto companies.

 

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Marco Santori – Bitcoin Law In The U.S., Part I

Marco Santori – Bitcoin Law In The U.S., Part I:

Marco Santori, Chairman of Bitcoin Foundation (@BTCFoundation)’s Regulatory Affairs Committee, gives a basic primer on the state of US law as it applies to digital currency entrepreneurs.  Excerpts of the post on Coindesk:

If the last few months have taught us anything, it is that there will soon exist a new and evolving body of law: The Law of Digital Currency, or, as some would prefer it: Bitcoin Law.”

”[…] ‘virtual currency’ is something of a loaded term, and bitcoin may not even be best described as a currency at all.”

“[In addition to regulators FinCEN and the SEC, the] consensus among legal professionals is that two more government agencies might soon have a hand in the market as well: the Commodity Futures Trading Commission (CFTC) and the Consumer Financial Protection Bureau (CFPB).”

“Some have called [FinCEN’s issuance of guidance] bitcoin’s ‘watershed moment’ because of its clear, unequivocal positive message: bitcoin is not illegal. The negative consequence, though, was just as obvious: Many bitcoin businesses models are illegal.”

“In effect, the [Bank Secrecy Act (BSA)] deputizes financial institutions, requiring them to act as the government’s foot soldiers in its war on money laundering.”

 – http://www.coindesk.com/bitcoin-law-what-us-businesses-need-to-know
 – http://bitcointalk.org/index.php?topic=276614.0 (Further discussion of the article)

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