CFTC Defies SEC Again: Calls Bitcoin, Ethereum, & USDC as Commodities

Paigambar Mohan Raj
Source: The Coin Republic

The Commodity Futures Trading Commission (CFTC) has defined Bitcoin (BTC), Ethereum (ETH), and USDC as commodities in a new fraud case. The development adds to the continued tussle between the CFTC and SEC (Securities and Exchange Commission) on who would oversee the digital asset arena.

The CFTC has filed a civil enforcement action against Rashawn Russell in the U.S. District Court for the Eastern District of New York. Russell is a former Deutsche Bank investment banker. The commission accuses Russell of fraud and misappropriating at least $1 million in funds.

The complaint stated that from around November 2020 to July 2022, Russell asked investors to contribute Bitcoin (BTC), Ethereum (ETH), and fiat currencies to his private trading fund. Russell falsely said that he would pay investors in USDC stablecoin and guaranteed at least a 25% return on investment (RoI).

The CFTC wants to punish the defendant with permanent trading and registration restrictions, restitution, disgorgement, and civil monetary penalties. A permanent injunction is also granted to prevent future contraventions of the Commodities Exchange Act (CEA) and other CFTC rules.

The CFTC continues to define Bitcoin and Ethereum as commodities

According to the CFTC, “Certain digital assets, such as bitcoin, ether, and USDC, are encompassed in the definition of a “commodity” under Section 1a(9) of the Act, 7 U.S.C. §1a(9), and contracts for their sale are subject to the prohibitions of Section 6(c)(1) of the Act, 7 U.S.C. § 9(1), and Regulation 180.1, 17 C.F.R. § 180.1 (2022).”

However, the SEC has repeatedly said that it only considers Bitcoin (BTC) as a commodity. Meanwhile, it deems every other cryptocurrency as a security. The SEC is currently in a legal battle with crypto firm Ripple, over the alleged sale of unregistered securities. Many expect the conclusion of the lawsuit to bring much-needed light to the argument of what is “security.”

Nonetheless, in June 2022, SEC Chair Gary Gensler said that he is looking for an agreement between the SEC and the CFTC. Gensler proposed having one single rulebook to govern the crypto space in the United States. Gensler contends that one set of regulations is required to stop dishonest actors from abusing the current regulatory loopholes. However, neither body has revealed any such initiative yet.