Here’s another article from Adam Bergman what appeared on Forbes.com –
On March 6, 2018, a federal judge has upheld the notion that cryptocurrencies, such as Bitcoin, are commodities and can therefore be regulated by the U.S. Commodity Futures Trading Commission (CFTC). Since 2015, the CFTC has claimed that cryptocurrencies were commodities. However, this is the first time a federal judge had confirmed their position.
On March 6, 2018, The Commodity Futures Trading Commission (CFTC) announced that the Honorable Jack B. Weinstein of the U.S. District Court for the Eastern District of New York entered a Preliminary Injunction Order against Defendants Patrick K. McDonnell and CabbageTech, Corp. d/b/a Coin Drop Markets (CDM). Following a hearing, Judge Weinstein found that the CFTC had shown a reasonable likelihood that Defendants will continue to violate the Commodity Exchange Act (CEA).
The CFTC on January 18, 2018, filed a federal civil enforcement action in the U.S. District Court for the Eastern District of New York against Defendants Patrick K. McDonnell, of Staten Island, New York, and CabbageTech, Corp. d/b/a Coin Drop Markets (CDM), a New York corporation, charging them with fraud and misappropriation in connection with purchases and trading of Bitcoin and Litecoin.
CabbageTech did business as Coin Drop Markets, a service that claimed to provide cryptocurrency investment advice. The CFTC filed its suit back in January 2018.
At issue in the case was whether the CFTC had the jurisdiction to regulate cryptocurrency as a commodity in the absence of federal level rules, and whether the law permitted the CFTC to “exercise its jurisdiction over fraud that does not directly involve the sale of futures or derivative contracts,” according to the court filings.
In both instances, Judge Weinstein answered yes, implying the case can be brought against the defendant and that the CFTC had jurisdiction over cryptocurrency related matters.
The CFTC isn’t the only regulator that claims oversight over the cryptocurrency business. The Securities and Exchange Commission (SEC) has noted that it views virtual currencies as securities, and has set up a whole “Cyber Unit” to tackle fraudulent initial coin offerings (ICOs).
The impact of Judge Weinstein’s decision can have a significant impact on the Bitcoin IRA industry. One of the more popular ways of purchasing cryptocurrencies with retirement funds involves the process of using brokers to purchase the cryptocurrencies on behalf of the IRA holder. The brokers will charge a transaction commission of anywhere from 10-25% for the purchase or sale of the cryptocurrency. However, if cryptocurrencies, such as Bitcoins, are viewed as a commodity, these brokers would potentially be required to register with the CFTC, and be members of the National Futures Association (NFA). In addition, these Bitcoin IRA brokers would likely be required to have passed the Series 3 National Commodity Futures Examination administered by the Financial Industry Regulatory Authority (FINRA). It is unclear exactly if any of these IRA brokers currently possess any of the requisite licenses under applicable law.
If you decide to work with a Bitcoin IRA broker, it is important to understand the financial and regulatory risks involved. Cryptocurrency IRA investors should have the financial ability to bear the risks of a cryptocurrency investment, and a potential total loss of their investment. Cryptocurrency investments, such as Bitcoins, are uncertain and highly volatile.