Cryptocurrencies Like Bitcoin Are Commodities, Federal Judge Says. Here’s Why That Matters
A federal judge has upheld the idea that cryptocurrencies such as Bitcoin are commodities, and can therefore be regulated by the U.S. Commodity Futures Trading Commission (CFTC).
The CFTC has been of this opinion for the last three years, and U.S. District Judge Jack Weinstein agreed on Tuesday.
Weinstein said the CFTC could go ahead and sue New Yorker Patrick McDonnell and his company, CabbageTech, for fraud.
CabbageTech did business as Coin Drop Markets, a service that claimed to provide cryptocurrency investment advice. The CFTC filed its suit back in January, alleging that the company solicited “money and virtual currencies” but never provided the promised advice.
“The CFTC Complaint further alleges that to conceal their scheme, soon after obtaining customer funds, Defendants removed the website and social media materials from the Internet and ceased communicating with [Coin Drop Markets] Customers, who lost most if not all of their invested funds due to Defendants’ fraud and misappropriation,” the regulator said at the time.
The CFTC isn’t the only regulator that claims oversight over the cryptocurrency business. The Securities and Exchange Commission (SEC) sees virtual currencies as securities, and has set up a whole “Cyber Unit” to tackle fraudulent initial coin offerings (ICOs).
Both federal agencies testified last month to the Senate, regarding the threats posed to investors by the booming cryptocurrency market. CFTC chair Christopher Giancarlo testified that the market deserves a “thoughtful and balanced” regulatory response.