The Power of CFTC to Fight Fraud Associated with Cryptocurrencies Challenged in Court
The power of the US Commodity Futures Trading Commission (CFTC) over cryptocurrencies has reportedly been challenged in court over its supervision of cryptocurrencies.
According to Reuters the case involving My Big Coin could determine whether the derivatives regulator “has the authority to combat fraud associated with cryptocurrencies.”
The debate over the jurisdictions of US regulators such as the Commodity Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) has become a bigger problem than the growing cryptocurrency industry this year.
Entrepreneur Randall Crater in January was sued by financial watchdog accusing him and his Nevada-based company My Big Coin of stealing $6 million from potential investors. This Thursday, June 14, U.S. District Judge Rya Zobel is set to hear arguments in the case.
Katherine Cooper, defense attorney, explained that the CFTC should not have jurisdiction in this case stating:
“Our argument boils down to the fact that because My Big Coin does not have future contracts or other derivatives trading on it, it is not a commodity,” and does not fall under the Commodity Exchange Act according to which the CFTC is the regulator.
The Commission received the authority on crypto in March when US Judge Jack Weinstein in Brooklyn “ruled for the first time that virtual currencies can be regulated by the agency as a commodity,” the publication reported. However, Crater’s lawyers argued:
The CFTC has no authority over the virtual currency because it [My Big Coin] is not a commodity like wheat or cotton or a service that is traded using futures contracts, the typical focus of the agency’s enforcement regime.
The case is receiving less attention due to guilt or innocence with respect to Crater and My Big Coin, and more because of what it could mean for the industry in the future. And the outcome could affect the ability of the Commission to monitor all future crypto frauds.
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