Under the Commodity Exchange Act ("CEA"), the Commodity Futures Trading Commission regulates the trading of futures, options and swaps on "commodities." The CEA defines "commodity" to include, among other things, "all services, rights, and interests in which contracts for future delivery are presently or in the future dealt in." 7 U.S.C. § 1a(9). The CEA prohibits any person from operating a facility for the trading or processing of commodity swaps unless the facility is registered as a swap execution facility ("SEF") or as a designated contract market ("DCM"). See 7 U.S.C. § 7b-3(a)(1).
On September 17, 2015, the CFTC ruled that "virtual currencies" are commodities subject to CFTC regulation. In an enforcement order issued by the CFTC against Coinflip, Inc., a bitcoin swap transactions firm, the CFTC stated that "[b]itcoin and other virtual currencies are encompassed in the definition and properly defined as commodities." See In re Coinflip, Inc., d/b/a Derivabit, CFTC Docket No. 15-29 (Sep. 17, 2015). The CFTC stated that Coinflip, Inc. violated the CEA by operating a facility for the trading or processing of commodity options without registering with the CFTC as a SEF or DCM.
On October 4, 2017, the CFTC stated that "virtual tokens may be commodities or derivatives contracts depending on the particular facts and circumstances." The CFTC stated that it "looks beyond form and considers the actual substance and purpose of an activity when applying the federal commodities laws and CFTC regulations." The CFTC noted that examples of prohibited digital currency activities include (i) price manipulation of a virtual currency traded in interstate commerce, (ii) pre-arranged or wash trading in an exchange-traded virtual currency swap or futures contract, (iii) a virtual currency futures or option contract or swap traded on a domestic platform or facility that has not registered with the CFTC as a SEF or DCM, and (iv) "certain schemes involving virtual currency marketed to retail customers, such as off-exchanged financed commodity transactions with persons who fail to register with the CFTC." CFTC Primer on Virtual Currencies, at p. 13 - 14 (October 4, 2017).
On December 1, 2017, Chicago Mercantile Exchange Inc. ("CME") and CBOE Futures Exchange, LLC ("CFE") self-certified contracts for bitcoin futures products, and Cantor Futures Exchange, L.P. ("Cantor") self-certified a contract for bitcoin binary options. The Chairman of the CFTC, in announcing the self-certifications, stated: “Bitcoin, a virtual currency, is a commodity unlike any the Commission has dealt with in the past. As a result, we have had extensive discussions with the exchanges regarding the proposed contracts, and CME, CFE and Cantor have agreed to significant enhancements to protect customers and maintain orderly markets. In working with the Commission, CME, CFE and Cantor have set an appropriate standard for oversight over these bitcoin contracts given the CFTC’s limited statutory ability to oversee the cash market for bitcoin.”
|Date||CFTC Guidance and Orders|
|09/17/2015||CFTC Order - Coinflip, Inc.|
|09/24/2015||CFTC Order - TeraExchange, LLC|
|06/02/2016||CFTC Order - Bitfinex|
|07/06/2017||CFTC Order of Registration for Ledger X as a Swap Execution Facility|
|07/24/2017||CFTC Order of Registration for Ledger X as a Derivatives Clearing Organization|
|10/04/2017||CFTC Primer on Digital Currencies|
|12/01/2017||CFTC Statement and Backgrounder on Self-Certified Contracts for Bitcoin Products|
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