In a ruling of particular importance to the digital currency community, the US Commodity Futures Trading Commission (CFTC) for the first time has definitively ruled that Bitcoin and other digital currencies (also known as virtual currencies or cryptocurrencies) are commodities subject to the CFTC’s jurisdiction. Specifically, in an enforcement action announced on September 17, 2015, the CFTC issued an order against an online platform and its CEO for facilitating the trading of Bitcoin options contracts. We discuss some of the implications of this order below.

In the CFTC’s enforcement action, the products listed on the trading platform were designated as put and call options contracts for which the underlying asset was Bitcoin, the most well-known form of digital currency. Additionally, the strike and delivery prices were denominated in US dollars, and premiums and payments of settlement were to be paid using Bitcoin at a spot rate determined by a designated third-party Bitcoin currency exchange. Platform users were also able to post bids and offers on the platform for the Bitcoin options contracts, and the trading platform acted as an intermediary to match bids and offers.

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