CFTC Rules Bitcoin is a Commodity Covered by the Commodity Exchange Act

The U.S. Commodity Futures Trading Commission (CFTC) has issued its first action against an unregistered bitcoin options platform, ordering the startup to suspend operations while it resolves registration issues.

The CFTC charged San Francisco startup Coinflip with conducting commodity options trading without registration or an exemption.

At the same time, the CFTC also confirmed that Bitcoin and other digital currencies are commodities covered by the Commodity Exchange Act (CEA). In the past, CFTC Chairman Timothy Massad has said that Bitcoin is likely to be considered a commodity.

CFTC Enforcement Director Aitan Goelman noted in a statement that digital currency companies will be held to the same set of standards as more traditional companies under its regulatory jurisdiction.

Goelman said:

“While there is a lot of excitement about Bitcoin and other virtual currencies, all participants in the commodity derivatives market are not exempt from the same rules just because they are innovative.”

More specifically, the CFTC found that Coinflip violated Section 4c of the Commodity Exchange Act and Part 32 of the CFTC’s regulations, which required the company to register as a swap execution facility or designated contract market. The agency also found that Coinflip CEO Francisco Riordan was responsible for these violations.

The CFTC provided clarity in its ruling, noting that commodities, as defined in section 1a(9) of the Commodity Exchange Act, include “all contracts for future delivery, services, rights, or interests in proceeds or future dealings.”

The agency wrote:

“The definition of ‘commodity’ is very broad… Bitcoin and other virtual currencies are included within this definition and are appropriately classified as commodities.”

In this regard, Houman Shadab, a professor at New York Law School, told CoinDesk that the CFTC’s monitoring of digital currency technology is limited in its scope of application.

However, he also believes that this ruling may have a greater impact.

“This ruling puts an end to any idea that virtual currencies are securities, which is, of course, a matter for the SEC, not the CFTC,” Shadab said.

The CFTC did not provide additional comment on the announcement.

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