Some Cryptocurrencies are Commodities under CFTC Oversight, US Judge Rules

US federal judge Rya Zobel has ruled that some cryptocurrencies meet the legal definition of commodities and are under the supervision of Commodity Futures Trading Commission (CFTC), Reuters reported on Thursday. The decision came several days after another judge said that some types of virtual coins are securities and can be under the control of the Securities and Exchange Commission (SEC).

The Zobel ruling comes as part of the CFTC’s actions against Randall Crater, the person behind the alleged cryptocurrency fraudulent activity of My Big Coin. In January, the regulator charged Crater and the company with the misappropriation of $6 million from investors between 2014 and 2018. CFTC also explained that the project had lured investors by claiming that their virtual coin was like the Bitcoin (BTC) and that it was not volatile as gold reserves backed it.

My Big Coin Company filed a counterclaim saying that CFTC did not have authority over the project as the company had not been offering commodities. However, the district judge of Boston Zobel backed CFTC oversight by ruling that the US federal Commodity Exchange Act (CEA) defines commodities in broad categories rather than specific types or brands.

The CFTC case against My Big Coin may now continue forward.

“We are disappointed in the result,” Crater’s lawyer Katherine Cooper told Reuters. “[…]we look forward to challenging the CFTC’s ability to prove many of the factual allegations in the complaint. Among those factual allegations are those which speak to the relatedness of bitcoin and My Big Coin and therefore the CFTC’s jurisdiction.”

The US federal securities and commodities acts were written decades before the birth of cryptocurrency - a situation that causes confusion over whether virtual coins are under SEC or CFTC oversight or cryptocurrencies are not part of the existing legal categories. One of the main topics of discussion among US regulators and Congressmen is whether all cryptocurrencies should be put under one legal definition as there is a significant difference among virtual coins and their usage.

According to SEC Chairman Jay Clayton, Bitcoin is not a security because it works as a “fiat substitute.” However, Clayton has reiterated several times that virtual coins issued during the Initial Coin Offering (ICO) process are securities.

The legal uncertainty and lack of regulatory clarity in the US were the main topics of discussion during a roundtable on Capitol Hill earlier this week.