The Commodity Futures Trading Commission’s (“CFTC”) Final Interpretive Guidance on the “actual delivery” exception to regulatory jurisdiction for digital assets became effective June 24, 2020. See 85 Fed. Reg. 37734. The CFTC unanimously adopted the Guidance in March: Retail Commodity Transactions Involving Certain Digital Assets, Rel. 8139-20 (Mar. 23, 2020).
The Final Guidance adopts the 2017 Proposed Interpretation with some minor changes. The “actual delivery” exception to CFTC regulatory jurisdiction still requires unencumbered physical ...
This term, Congress is set to consider several bills—each with bipartisan sponsorship—targeting the fields of blockchain, cryptocurrency, and fintech. This spurt of legislative activity indicates an increased awareness by lawmakers of both the opportunities for innovation in these fields and the potential pitfalls and risks for illicit use posed by these new technologies. The following are several of the bills that have been introduced this term to date which aim to promote blockchain and cryptocurrency:
- The Blockchain Regulatory Certainty Act (H.R. 528), introduced in ...
On October 3, 2018, the Securities and Exchange Commission sued Blockvest LLC and its founder Reginald Buddy Ringgold, III for falsely claiming that its initial coin offering had been approved by the SEC. The complaint, filed in the United States District Court for the Southern District of California, Case No. 18-CV-2287-GPC, sought a return of improperly obtained funds as well as a temporary restraining order to "halt the fraudulent offer and sale of unregistered securities" by Blockvest and to freeze the assets of both Blockvest and Ringgold.
The SEC's complaint alleges that ...
After Bitfinex, the CFTC issued its Proposed Interpretation on "Retail Commodity Transactions Involving Virtual Currency." Proposed Interpretation, 82 Fed. Reg. 60335 (CFTC Dec. 20, 2017). Although the comment period closed March 20, 2018, the CFTC has taken no further action on the Proposed Interpretation to date.
The CFTC will assert Commodities Exchange Act regulatory jurisdiction over any "entity or platform [that] offers margin trading or otherwise facilitates the use of margin, leverage or financing arrangements for their retail market participants…." Id. at 60337 ...
In a series of 2015 decisions, the CFTC determined that virtual currency is a commodity subject to its jurisdiction.
In a 2016 settled enforcement action, the CFTC took the position that an unregistered platform administering and providing margin trading contracts in crypto-currencies to non-eligible ("retail") users violated the provisions of the Commodities Exchange Act, In the Matter of BFXNA, Inc. d/b/a Bitfinex, No. 16-19 (CFTC Jun 2, 2016), where:
- Bitfinex controlled the keys to the customer and escrow wallets involved in the margin lending.
- Bitfinex used book-entry ...
The 2011 Dodd-Frank Act amended the CFTC's jurisdiction to authorize regulation of
"retail commodity transactions offered 'on a leveraged or margined basis, or financed by the offeror, the counterparty, or a person acting in concert with the offeror or counterparty on a similar basis.' Dodd-Frank [Publ. L. No. 111-203] § 742, 124 Stat.  at 1732-33 (codified at 7 U.S.C. § 2(c)(2)(D)[(i)])."
CFTC v. Hunter Wise Commodities, LLC, 749 F. 3d 967, 970 (11th Cir. 2014). The Hunter Wise Court held those amendments in fact expanded the CFTC's jurisdiction. But that expanded ...
Prior to Dodd-Frank, the CFTC and Courts recognized a distinction between traded futures contracts subject to CFTC jurisdiction and individualized non-exchange-traded contracts for the present sale of a cash commodity for deferred or future delivery (a "forward contract" or just "forward"). Forwards are exempt from CFTC jurisdiction. Unlike futures, cash forwards contemplates actual physical delivery, contain individualized terms, involve a commodity of intrinsic value (itself, not just the contract), and are not transferable or traded contracts.
Generally, a cash ...
This is Part 3 of a seven-part series of posts looking at some broad legal issues affecting crypto-currencies.
A. Regulatory Catch-Up.
As is often true of emerging technologies, the crypto-rush of the last few years has left regulators of all types struggling to catch up. The resulting confusion increases entrepreneurial and transactional risks, and also increases fraud risks (about the only thing all regulators agree about).
Various United States federal regulators have expressed interest in crypto-currencies, and claimed some jurisdiction over,
- The Securities and Exchange ...
- China Bans Crypto Currencies and Related Services
- DTCC Proposes Path to T+1 Settlement Cycle in Two Years
- CFTC Final Guidance on "Actual Delivery" CEA Exemption for Cryptocurrency
- Paxos Starts Blockchain Settlement of US Equities
- Social Media Crypto “Influencer” Not Above the Law
- Proposed SEC Rule 195 Token Incubation Safe-Harbor
- Renegade Pandas, Competitive Regulation and a Token Safe-Harbor?
- POQ No-Action Letter: DLT “Arcade Tokens” Aren’t Securities
- IRS Sends Out 10,000 Cryptocurrency Tax Letters
- State Law Fintech Roundup