A federal judge issued a 79-page order Tuesday establishing regulatory authority over virtual currency.
U.S. District Senior Judge Jack B. Weinstein of the Eastern District of New York issued the opinion granting standing to the Commodity Futures Trading Commission to exercise its enforcement power over virtual currency fraud.
The judge held that the Commodity Futures Trading Commission can regulate virtual currency as a commodity and exercise its jurisdiction over fraud that does not directly involve the sale of futures or derivative contracts.
Weinstein also issued a preliminary injunction in the commission’s favor in a case against Cabbage Tech Corp., doing business as Coin Drop Markets, and Patrick K. McDonnell of Staten Island.
The CFTC sued McDonnell and his company, Coin Drop Markets, alleging operation of “a deceptive and fraudulent virtual currency scheme … for purported virtual currency trading advice” and “for virtual currency purchases and trading,” Weinstein said.
“Until Congress clarifies the matter, the CFTC has concurrent authority, along with other state and federal administrative agencies, and civil and criminal courts, over dealings in virtual currency,” Weinstein said. “An important nationally and internationally traded commodity, virtual currency is tendered for payment for debts, although, unlike United States currency, it is not legal tender that must be accepted.”
The litigation raised the issue of whether the CFTC has standing to sue defendants for alleged violations of the Commodity Exchange Act.