The CFTC has jurisdiction to regulate the virtual currency markets, NY District Court holds

On March 6, 2018, the U.S. District Court for the Southern District of New York found that the Commodity Futures Trading Commission (CFTC) has standing to exercise its enforcement power over fraud related to virtual currencies sold in interstate commerce.

According to the facts, Defendants offered fraudulent trading and investment services related to virtual currency. “Virtual currency” being a digital representation of value that functions as a medium of exchange, a unit of account and/or a store of value, but does not have legal tender status in any jurisdiction (see the complaint).

Pursuant to Title 7 U.S.C. § 13a-1(a) the CFTC may seek injunctive or other relief when it believes that a person or entity is in violation of the Commodity Exchange Act (CEA). As for its enforcement powers, the CFTC has exclusive jurisdiction over “accounts, agreements . . . and transactions involving swaps or contracts of sale of a commodity for future delivery” Title 7 U.S.C. § 2 (emphasis added).

Considering that the Congress didn’t act to regulate virtual currencies, at present there is either no regulation or a mere partial supervision by several federal administrative bodies, like the CFTC, the SEC, the IRS, the DOJ, the Treasury Department, and other state agencies. Therefore, the District Court had to decide whether Virtual Currencies could be considered as commodities in order to afford the CFTC’s oversight authority.

Judge Weinstein concluded finding that virtual currencies – including intangible ones like bitcoin – are commodities because they are “goods” exchanged in a market for a uniform quality and value.” Therefore, the FTC has standing to exercise its enforcement powers over frauds relating to virtual currencies.

CFTC v. McDonnell, 2018 U.S. Dist. LEXIS 36854, 2018 WL 1175156 is available at…



To know more about legal implication of virtual currencies, Francesca Giannoni-Crystal