Court Denies Defendants’ Motion to Dismiss in Commodity Fraud Case Involving the Virtual Currency My Big Coin

By: Richard B. Levin and Paul J. Roshka

On September 26, 2018, Senior Judge Rya W. Zobel of the U.S. District Court for the District of Massachusetts, entered an order holding that the Commodity Futures Trading Commission (CFTC) has the power to initiate enforcement actions involving virtual currencies and denying the defendants’ motion to dismiss the CFTC’s amended complaint.  The Court held that the CFTC had sufficiently alleged that the particular virtual currency at issue, My Big Coin (MBC), was a commodity under the Commodity Exchange Act (CEA) because the CFTC alleged that MBC “is a virtual currency and it is undisputed that there is futures trading in virtual currencies (specifically involving Bitcoin).”  The Court noted, the term “commodity” “includes a host of specifically enumerated agricultural products as well as ‘all other goods and articles . . . and all services rights and interests . . . in which contracts for future delivery are presently or in the future dealt in.”  The Court noted that “Congress’ approach to defining ‘commodity’ signals an intent that courts focus on categories—not specific items.”  The Court concluded that “[t]his broad approach also accords with Congress’s goal of ‘strengthening the federal regulation of the . . . commodity futures trading industry,’ . . . since an expansive definition of ‘commodity’ reasonably assures that the CEA’s regulatory scheme and enforcement provisions will comprehensively protect and police the markets.”