U.S. District Judge Jack Weinstein’s Tuesday decision was based on the CFTC’s 2015 determination that cryptocurrencies are equivalent to commodities. CNBC reports that Judge Weinstein noted that the CFTC had “broad leeway” in applying federal commodity regulations.
Judge Weinstein’s ruling lets the fraud case, initiated in January of this year, continue between the CFTC and New York resident Patrick McDonnell and his company Coin Drop Markets.
The CFTC claims in the the lawsuit that customers who paid McDonnell and Coin Drop for crypto trading advice did not receive the advice, and that McDonnell shut down Coin Drop’s website and failed to respond to customers. The lawsuit also notes that Coin Drop was not registered with the CFTC.
Weinstein’s addition of a preliminary injunction on March 7 against McDowell and his company has currently stopped either of the two from participating commodity transactions.
Since the US does not currently have any singular regulatory body that oversees cryptocurrency regulation, US regulators have long debated whether it is more accurate to align virtual currencies with commodities or securities.
In the fall of last year, the US Securities and Exchange Commission (SEC) took action against Initial Coin Offerings (ICO), regulating them as securities, while the CFTC’s July 2017 approval of Bitcoin futures trading means they see cryptocurrencies as commodities.
A joint hearing between the CFTC and the SEC on their roles in the cryptocurrency sphere at the beginning of last month showed that the two are willing to work together to create a regulatory crypto framework.