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Are Cryptocurrencies Commodities?

Bitcoin and Blockchain, Finance and Securities

On June 14, 2018, the U.S. Commodity Futures Trading Commission (CFTC), in a suit against My Big Coin Pay Inc., founder Randall Carter, and salesman Mark Gillespie, requested Boston Judge Rya Zobel to rule that cryptocurrencies fall within the ambit of “goods and articles”, so that the CFTC can have the power regulate them as commodities. My Big Coin Pay is charged with the fraudulent sale of $6 million in the virtual currency My Big Coin. My Big Coin Pay has argued that because the company did not offer futures contracts, the CFTC cannot regulate their activity.

The CFTC argues that cryptocurrencies are the “digital representations”[1] of traditional commodities that are listed in the Commodity Exchange Act, and therefore they should fall into the scope of the CFTC’s regulating power. What are commodities according to the CFTC? A number of agriculture products such as wheat and cotton, in addition to “all other goods are articles … and all services, rights and interests … in which contracts for future delivery are presently or in the future dealt in.”[2]  Due to the broad definition, the CFTC have repeatedly argued that cryptocurrencies, such as Bitcoin, fall into their jurisdiction as commodities, and so far the courts in other jurisdictions have agreed.[3]

My Big Coin Pay argues that their product does not fall into this definition because virtual currencies are not goods and unlike Bitcoin, My Big Coin cannot be traded on an exchange at a predetermined fixed price in the future. Laura Greenberg-Chao, who represents My Big Coin, explained that “[t]he qualifier [for a virtual currency to fall within the ambit of commodities] is that ‘if there are future contracts,’ and that’s what is missing here”.[4] Therefore, the CFTC should not have the power to regulate virtual currencies that do not offer futures contracts, simply because they fall out of the scope of the CFTC’s power. 

The CFTC is deviating from its original stance in 2015, when it argued that cryptocurrency frauds should be considered as commodities because they act as “services”, rather than “goods and articles”.[5] It is not uncommon for an agency to change its mind in regards to how cryptocurrencies should be regulated, however, as the use of cryptocurrencies become more popular, it would be helpful for regulators and the courts to come to a consensus on how to govern virtual currencies whether they do or do not offer futures contracts. William Hinman, the SEC Director of Corporation Finance, announced on June 14, 2018 that Bitcoin and Ether (the token provided by Ethereum) being offered and sold on their decentralized platforms are not securities, unless they are “in a fund or trust and sell interests”.[6] Going forward, this new stance may sway the CFTC and courts on how they view and regulate virtual currencies.

[1] Noon, A. (June 14, 2018) “CFTC Calls Virtual Currencies ‘Goods’ At Boston Hearing .” Law360. Available at: Accessed on June 22, 2018.

[2] 7 U.S.C. § 1a(9)

[3] See In the Matter of Coinflip Inc., CFTC Docket No.15-29, Sept. 17, 2015; CFC v. McDonnell, 18-cv-361 (EDNY), ECF No. 29, March 6, 2018.

[4] Op. Cit. n1.

[5] Ib.

[6] Hinman, W. (June 14, 2018) “Digital Asset Transactions: When Howey Met Gary (Plastic).” U.S. Securities and Exchange Commission. Available at: Accessed on June 15, 2018.

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