In the U.S. virtual currencies are recognized as commodities

   286

U.S. District Judge Jack Weinstein in Brooklyn ruled that the CFTC has the right to sue New York resident Patrick McDonnell and his company Coin Drop Markets, which allows the case to go forward.

Weinstein also entered into a preliminary injunction prohibiting McDonnell and Coin Drop Markets to participate in commodity transactions.

McDonnell, who is representing himself, declined to comment on the decision.

The CFTC, which is charged with regulating the markets for commodities, futures and derivatives, first determined that virtual currencies, also known as cryptocurrencies, are commodities in 2015.

Weinstein confirmed that determination on Tuesday, saying that it was supported by the simple meaning of the word "commodity" and that the CFTC has broad discretion to interpret the federal law regulating commodities.

In a lawsuit filed in January, the CFTC said that since January 2017, McDonnell and his company fraudulently offered customers virtual currency trading advice.

In fact, according to the agency, customers never received the advice for which they paid, and that Coin Drop Markets was never registered with the CFTC. It said that McDonnell withdrew the company's website and stopped responding to customer requests.

The regulation of virtual currencies is still at an early stage. Congress has not passed any laws aimed at it. Both the CFTC and Securities and Exchange Commission have warned of the need to combat fraud in the virtual currency markets.