Court Agrees With CFTC Classification Of Virtual Currencies As Commodities

On Tuesday, the CFTC was granted a preliminary injunction in its case against Patrick K. McDonnell and CabbageTech, Corp, a ruling which supports the agency’s 2015 finding that virtual currencies like bitcoin are commodities.

  • On March 6, 2018, Judge Jack B. Weinstein of the US District Court for the Eastern District of New York entered a preliminary injunction order against defendants Patrick K. McDonnell and CabbageTech Corp, also known as Coin Drop Markets (CDM). ETHNews reported on the case when the Commodity Futures Trading Commission (CFTC) announced its federal civil enforcement action against McDonnell and CDM in January.

    “Judge Weinstein found that the CFTC had shown a reasonable likelihood that Defendants will continue to violate the Commodity Exchange Act (CEA),” explained a CFTC release on the matter. “The Court’s Order prohibits the Defendants from engaging in fraud in violation the CEA, requires Defendants to preserve books and records, and requires Defendants to provide expedited discovery.”

    In granting the CFTC’s preliminary injunction, Judge Weinstein agreed with the agency’s 2015 finding that bitcoin and other virtual currencies are “properly defined” as commodities. This signals that, as of now, the court endorses the CFTC’s regulatory authority over cryptocurrencies and their kind.

    Like the Securities and Exchange Commission (SEC), the CFTC recently provided guidance for its employees regarding potential cryptocurrency investments. Both agencies have been working vigorously to determine what sort of jurisdiction they have over virtual currencies and related initial coin offerings (ICOs). Last month, SEC chairman Jay Clayton and CFTC chairman J. Christopher Giancarlo testified on cryptocurrencies before the Senate Banking Committee.

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