With over 1,500 different virtual currencies and an approximate market capitalization of $300 billion, the need for some type of federal regulation of cryptocurrencies is self-evident. Unsurprisingly, the Securities and Exchange Commission and the Commodity Futures Trading Commission are staking strong claims to policing this virtual Wild West. The SEC was quick to apply well-established principles to new technologies and products in the initial coin offering (“ICO”) context. The SEC’s approach is well-grounded in precedent but could leave many cryptocurrencies outside of its reach. The CFTC is trying to fill this potential regulatory vacuum by asserting that all cryptocurrencies are commodities under the Commodity Exchange Act. While CFTC’s approach was approved recently by the U.S. District Court for the Eastern District of New York in CFTC v. McDonnell, this case is unlikely to be the last word on the CFTC’s cryptocurrency jurisdiction.
In this article, RK&O partner Paul Devlin wades into some of the questions that the courts, CFTC regulators and commodity lawyers alike should be asking about the CFTC’s power to regulate cryptocurrencies. In particular, he investigates whether cryptocurrencies in fact satisfy the Commodity Exchange Act’s definition of “commodity,” a precondition for CFTC jurisdiction in this space.