Back in 2015, the CFTC, which is tasked with regulating commodity, futures and derivatives markets, first determined that virtual currencies, also known as cryptocurrencies, are commodities. Now, the US District Judge Jack Weinstein in Brooklyn ruled that the CFTC had standing to bring a fraud lawsuit against Coin Drop Markets, allowing the case to go forward.
In its lawsuit, announced in January, the CFTC said that since about January 2017, the company fraudulently offered customers virtual currency trading advice. In fact, the agency said, the customers never received the advice they paid for, and that Coin Drop Markets was never registered with the CFTC.
The judge also entered a preliminary injunction barring Coin Drop Markets from engaging in commodity transactions. Weinstein upheld that determination on March, 6, saying it was supported by the plain meaning of the word “commodity” and that the CFTC had broad leeway to interpret the federal law regulating commodities.
However, regulation of virtual currencies is still in its early stages. Congress has not passed any laws addressing it directly. Both the CFTC and Securities and Exchange Commission (SEC) have warned of the need to combat fraud in the virtual currency markets.
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