CFTC Backed By U.S. Federal Judge Recognizing Virtual Currencies As Commodities

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CFTC Backed By U.S. Federal Judge Recognizing Virtual Currencies As Commodities

Posted on September 27th, 2018 in Government Regulation by Ryan Warner

The CFTC was recently told by US District Judge Rya Zobel they could work toward charging My Big Coin Pay Inc. with fraud allegations, as reported by Reuters. It was also stated that cryptocurrencies fall under the distinction of commodities and the US derivatives regulator has complete authority to investigate the case. The CFTC (Commodity Futures Trading Commission) is an independent agency of the US government that focuses on regulating options and futures markets.

The US District Court has permitted virtual currency fraud investigations by the CFTC. The report states that the CFTC has recently accused Coin Pay Inc. and its owner Randall Carter with misappropriation of funds and commodity fraud. According to the report, Randall has committed a fraud of $6 million on individuals who allegedly wanted to buy My Big Coin (MBC). MBC was founded in 2013 as a blockchain powered cryptocurrency where buyers and sellers can process transactions.

A CFTC report stated that $6 million had been embezzled from 28 customers under the false pretense that MBC was similar to Bitcoin and that the virtual currency was backed by gold. Carter's lawyer proposed the dismissal of the case stating that MBC was neither a tangible asset nor a service on which futures were being traded. Therefore, the CFTC had no authority.

Federal Judge Rya Zobel stated that My Big Coin fell under the definition of a commodity under the Commodity Exchange Act. Zobel added the law does not define commodities in a specific form but rather by broader categories. Additionally, Bitcoin futures are currently traded on U.S. exchanges both BTC and MBC could be broadly described as virtual currencies. Zobel added:

“That is sufficient, especially at the pleading stage, for a plaintiff to allege that My Big Coin is a ‘commodity’ under the Act”

The CFTC's allegations were accepted for the purpose of determining that it has the authority to scrutinize the defendants. A form examination of the case before a judge and jury is still pending and the result of the case will determine the case moving forward.

Katherine Cooper, Randall's lawyer, stated they were very disappointed with the ruling and further challenged the CFTC to prove the allegations related to MBC and BTC's similarities and whether the CFTC has jurisdiction in the case.