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1 1 (December 6, 2018)

handle is hein.crs/govyjq0001 and id is 1 raw text is: Congressional ______ *Research Service CFTC and Virtual Currencies: New Court Rulings and Implications for Congress Updated December 6, 2018 Over the past few months, several federal district courts have ruled in favor of the Commodity Futures Trading Commission (CFTC) in its first wave of fraud-based enforcement actions involving Bitcoin and other virtual currencies (also referred to as digital currencies, cryptocurrencies, digital tokens or digital coins). With several district court judges now agreeing with the CFTC's position that virtual currencies are commodities as defined in the Commodity Exchange Act (CEA or Act), new legal authority supports the CFTC's efforts in enforcing against fraud and manipulation, in addition to carrying out certain other powers, in the virtual currency realm. With these new rulings come possible new legal questions that Congress may consider, including the decisions' implications for the CFTC's enforcement authority and the overall scheme of regulation for digital coins. Moreover, as discussed further below, the new case law, coupled with enforcement activity underway by the Securities and Exchange Commission (SEC) with respect to digital coins, means that the CFTC shares regulatory authority in the cryptocurrency space with several other regulators. This Sidebar addresses these issues by providing background on the CFTC's regulatory role and discussing the recent judicial opinions concerning its authority over virtual currencies, before highlighting areas of potential overlap-as well as gaps-existing in the current federal regulatory framework for virtual currencies. CFTC Authority Under the Commodity Exchange Act The CFTC is the primary federal agency charged with overseeing markets in derivatives-i.e., financial contracts that derive their value by reference to an underlying asset (or rate or index), whose prices rise or fall based on fluctuations in the value of that underlying asset. Derivative contracts generally stand in contrast to, for example, contracts for the sale of a good or asset that is itself promptly delivered to the other party. The CFTC has regulatory authority over derivatives including commodity futures, options, and (more recently as a result of Dodd-Frank) swaps. The CEA regulates trading in commodity futures and contains the statutory framework under which the CFTC operates. (It should be noted that the CFTC generally does not have regulatory oversight authority over spot trading, as opposed to derivatives trading, in commodities). For example, the CEA requires the registration of exchanges and platforms for trading in certain derivatives, such as designated contract markets (i.e., futures exchanges) and swap execution facilities (i.e., systems or platforms for multiple participants to engage in swap trading). Congressional Research Service https://crsreports.congress.gov LSB10227 CRS Legal Sidebar Prepared for Members and Committees of Congress

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