Federal judge: Cryptocurrencies are commodities subject to regulation

By Amanda Thomas | Mar 22, 2018

BROOKLYN, N.Y. (Legal Newsline) – A federal judge has ruled that cryptocurrencies like Bitcoin are commodities that can be regulated by the U.S. Commodity Futures Trading Commission (CFTC).

Judge Jack B. Weinstein of the U.S. District Court for the Eastern District of New York entered a preliminary injunction against virtual currency company CabbageTech Corp. and its owner Patrick K. McDonnell of Staten Island, New York. 

Weinstein found it was reasonably likely the defendants, who are alleged to be involved in a fraudulent virtual currency scheme, will continue to violate the Commodity Exchange Act (CEA).

The March 6 ruling supports the CFTC’s 2015 finding that Bitcoin and other virtual currencies are commodities.

“CFTC has standing to exercise enforcement power over fraud related to virtual currencies sold in interstate commerce,” the order reads.

On Jan. 18, the CFTC filed a federal civil enforcement action against McDonnell and CabbageTech, a New York corporation doing business as Coin Drop Markets (CDM), a service claiming to provide cryptocurrency investment advice. 

The defendants were charged with fraud and misappropriation connected with the purchase and trading of Bitcoin and Litecoin. The complaint alleged that customers who provided money to CDM and McDonnell to purchase or trade on their behalf ever saw the funds again.

At issue in the case was whether the CFTC had the jurisdiction to regulate cryptocurrency as a commodity in the absence of federal level rules. Also at issue was whether the law permitted the CFTC to “exercise its jurisdiction over fraud that does not directly involve he sale of futures or derivative contracts.”

Weinstein answered yes in both instances, implying the case can be brought against the defendant and the CFTC had jurisdiction over cryptocurrency-related matters.

According to the order, CFTC is seeking, “injunctive relief, monetary penalties and restitution of funds received in violation of the Commodity Exchange Act.”

Want to get notified whenever we write about any of these organizations ?

Sign-up Next time we write about any of these organizations, we'll email you a link to the story. You may edit your settings or unsubscribe at any time.

Organizations in this Story

U.S. Commodity Futures Trading Commission U.S. District Court for the Eastern District of New York

More News

The Record Network