Those involved at the forefront of the fight against cryptocurrency fraud received a boost recently after a regional American court issued a statement in favour of regulation.
The United States District Court in Massachusetts took the side of the CFTC, or Commodity Futures Trading Commission, in a debate over whether or not a virtual currency could be classed as a commodity
In the ruling, the court said that the My Big Coin cryptocurrency could be classed as a commodity – meaning that the CFTC has the jurisdiction to consider any alleged fraud relating to the currency as under its jurisdiction.
The court made reference to relevant laws in the field, namely the Commodity Exchange Act. It pointed out that the act did not require specifics in order to function.
“The Act defines ‘commodity’ generally and categorically, ‘not by type, grade, quality, brand, producer, manufacturer, or form”, the ruling said.
“For example, the Act classifies “livestock” as a commodity without enumerating which particular species are the subject of futures trading.”
The ruling came after My Big Coin attempted to have the CFTC’s case against it thrown out of court on the grounds of lack of jurisdiction.
The CFTC accuses those behind the cryptocurrency of using untrue statements to attract more investors. It told its customers, for example, that the cryptocurrency could be used for payment in the same locations that Mastercard could be, and it also said that it was backed by gold.
However, the ruling clearly shows that the CFTC did indeed have the authority to pursue this case, and the ruling made several other key points bolstering this position.
It pointed out, for example, that courts regularly throw out lack of jurisdiction claims in equivalent cases found in other market sectors.
“Finally, the scant case law on this issue also supports plaintiff’s approach. In a series of cases involving natural gas, courts have repeatedly rejected arguments that a particular type of natural gas was not a commodity because that specific type was not the subject of a futures contract”, it said.
My Big Coin had also made a suggestion that the court should not have the right to move ahead with the case given that it’s not a federal, or US-wide, body.
However, the court threw out this claim, too – a move which will perhaps make cryptocurrency firms accused of fraud think twice in the future about using the local courts as a way to evade legal scrutiny.
“As an initial matter, although defendants suggest that this court does not have subject matter jurisdiction for lack of a federal question, their underlying argument that the alleged conduct did not involve a ‘commodity’ goes to the merits of plaintiff’s claim, not jurisdiction”, it wrote in its judgement.
The issue of whether cryptocurrencies are classed as commodities, securities or something else has long persisted.
The CFTC has claimed that they are commodities ever since 2015, but it was not until March of this year that their position was first recognised and affirmed in the federal courts.