Cryptocurrencies Should Be Regulated Like Commmodities, Judge Rules

Nearly two-and-a-half years after the CFTC officially declared that bitcoin and cryptocurrencies more broadly would be regulated like securities, a federal judge has ruled that the agency does, in fact, have the authority to regulate the fledgling asset class, according to the same rules governing energy and metals, effectively defining cryptocurrencies as commodities.

US District Judge Jack Weinstein ruled that the CFTC had the standing to bring a fraud lawsuit against New York resident Patrick McDonnell and his company Coin Drop Markets, permitting the case to move forward. Weinstein also preemptively barred McDonnell and CDM from engaging in commodity transactions, according to coindesk.

"Virtual currencies are 'goods' exchanged in a market for a uniform quality and value. ... They fall well within the common definition of 'commodity'," the judge wrote in the order on Tuesday.


In the lawsuit, the CFTC alleged that McDonnell and his company had fraudulently offered customers virtual currency trading advice beginning in January 2017. After customers handed over their money, instead of passing along his advice, McDonnell took down the company's website and stopped responding to customers, the CFTC alleged. CDM also failed to register with the CFTC. McDonnell took down the company’s website and stopped responding to customers. McDonnell, who is representing himself in the case, declined to comment to Reuters.

At issue in the case was whether the CFTC had the authority to regulate cryptocurrency as a commodity in the absence of federal level rules, and whether the law permitted the CFTC to "exercise its jurisdiction over fraud that does not directly involve the sale of futures or derivative contracts," according to the document.

In both instances, Weinstein answered in the affirmative, meaning the case can be brought against the defendant.

The CFTC  had defined cryptocurrencies as commodities as far back as 2015, a decision that has led the agency to recently target cryptocurrency businesses that it considers are hoaxing investors.

Since Congress hasn't yet acted to pass a regulatory framework for cryptocurrencies, the CFTC and Securities and Exchange Commission (SEC) have moved ahead with their own, often vague, decrees, like when the SEC ruled over the summer in its finding on the collapse of the DAO that crypto tokens should be regulated and registered according to SEC securities laws.

Banks have already identified crypto as a threat in terms of both the potential for fraud and also as a form of disruptive competition. The bank has made efforts to restrict its customers’ use of bitcoin and other virtual currencies. Citigroup and JPMorgan Chase have also banned purchases of cryptocurrency on their credit cards. However, these regulator vagaries didn't stop the CFTC from granting exchanges permission to offer bitcoin derivatives like the bitcoin futures offered by the Cboe and CME.

The full ruling is below


HRClinton TheSilentMajority Wed, 03/07/2018 - 10:20 Permalink

"Banks have already identified crypto as a threat in terms of both the potential for fraud and also as a form of disruptive competition. The bank has made efforts to restrict its customers’ use of bitcoin and other virtual currencies."

Nuff said. The Tribe is upset and worried, unless they control it.

"No one gets off the (((Plantation))) alive or rich", is their mindset. 

In reply to by TheSilentMajority

Ramesees lester1 Wed, 03/07/2018 - 08:01 Permalink

Just pay your taxes and you’re fine. Half a fortune is still half a fortune. 

I have a high 6 figure bill to the IRS for 2017. It’ll be painful to write that check but I’m not going to prison for not paying taxes on what are basically lottery winnings. 

The only thing I did that was smart was see the value in Bitcoin and put a fairly substantial amount in in January 2017. I actually lost money trading but made so much by hodling it didn’t matter. 

In reply to by lester1

HRClinton lester1 Wed, 03/07/2018 - 10:25 Permalink

What is this, Amateur Hour or "let's shill for Banksters"?

You only get taxed if...

1. You're a US PERSON and...

2. Have transacted on shitty exchanges like Coinbase.

You will NOT have to pay a forking penny, if ...

A. You're a Non-US Person, or become one by leaving the US, along with the right paper steps to satisfy the IRS. 

B. You move to a TFJ (Tax Friendly Jurisdiction) somewhere in the world and convert CC into fiat, via an exchange. The stay there or return some time later, after you've declared your fiat gains to the TFJ and paid miniscule taxes, leaving the rest Free & Clear in fiat land.

C. You use P2P exchanges to swap CC, the way hookers swap body fluids with clients: constantly.

D. You convert CC for any real asset, that is compact and portable: AU, Gems, Art, IP (Patent, Copyright).

E. You sell a real asset for cash (somewhere in the world) is also no one's business, when done in a private transaction. 

E.g. Say I bought a bunch of BTC from an Asian miner, for cash years ago, and then HODLed it till... last Nov/Dec. Then, let's say that I sold some of my HODLed BTC overseas, in a law office, for a stack of 0.9999 AU coins. This was a private exchange of Assets, that involved no fiats and no US tax jurisdiction. Thus: Zero Tithing to (((IRS))).

You are now protected by the dual firewall of Jurisdiction negation and Total Info-Darkness. Let the IRS chase poor, dumb Schmucks, or the 47% who don't even pay taxes.

x x x x x x x x x

That whiney, BS and FUD-spreading little bitch "lester1" has no comeback for this of course -- cause there is none -- but that won't stop him/her from repeating his/her whiney bitch act each day. Cause he/she just can't help himself.

In reply to by lester1

RedDwarf HRClinton Wed, 03/07/2018 - 10:46 Permalink

Others including myself have pointed it out before, so you don't get the dibs, but I agree.  Decentralized exchanges, jurisdictional competition, and other factors will keep them from being too regulated in practice.

The thing the regulatory agencies will need to realize is that some cryptos are currencies, some are securities, some are commodities, and others are even other things.  They will turf war fight to each own 'regulating' them since it's the nature of governmental agencies to attempt to dominate the world.

In reply to by HRClinton

HRClinton Yellow_Snow Wed, 03/07/2018 - 11:21 Permalink

p.s. CC is not a Commodity. Commodities are raw materials and agricultural goods.

CC is a Digital Asset: CCs are Precious Information UnitsJust as Au and Ag are Precious Metals, so CCs are Precious Information. Both are Precious. The former is physical, the latter is virtual (digital, encrypted). 

Being virtual, simply means that they move electronically, rather than physically. 

That is NOTHING like a Commodity, you stupid, corrupt (((judge)))! What he has done (or tried to do), is to set Precedent that all Digital Assets (CC or SW) can be shifted by decree/fiat from Private domain to a Public domain.

Asset swaps are private transactions (if they don't involve the Sovereign's "Coin of the Realm". Otherwise the Sovereign has a right to demand taxes.

In reply to by Yellow_Snow