The CFTC has settled charges against Bitcoin options platform operator Coinflip and its chief executive officer Francisco Riordan for conducting commodity options transactions without complying with the Commodity Exchange Act and CFTC Regulations.
Specifically, the charges relate to operating a facility for the trading or processing of commodity options without complying with the CEA
Regulations otherwise applicable to swaps or conducting the activity pursuant to the CFTC’s exemption for trade options.
The Order finds that, from in or about March 2014 to at least August 2014, Coinflip and Riordan operated an online facility named Derivabit, offering to connect buyers and sellers of Bitcoin option contracts.
The Order requires Coinflip and Riordan to cease and desist from further violations of the CEA
and Regulations, as charged, and to comply with specified undertakings.
Aitan Goelman, the CFTC’s Director of Enforcement, says: “While there is a lot of excitement surrounding Bitcoin and other virtual currencies, innovation does not excuse those acting in this space from following the same rules applicable to all participants in the commodity derivatives markets.”
Order finds that Coinflip designated put and call options for the delivery of Bitcoins as eligible for trading on the Derivabit platform. Under Section 4c of the CEA
and Part 32 of the CFTC’s Regulations, commodity option transactions must either be conducted in compliance with provisions of the CEA
or Regulations otherwise applicable to swaps, or conducted pursuant to Regulation 32.3, the “trade option” exemption. In the Order, the CFTC
for the first time finds that Bitcoin and other virtual currencies are properly defined as commodities. The Order further finds that the activities related to commodity option transactions were not conducted in compliance with a provision of the CEA
or a provision of the Regulations otherwise applicable to swaps, and were not conducted pursuant to the Regulation 32.3 “trade option” exemption.
Additionally, the Order finds that Coinflip operated a facility for the trading of swaps but did not register the facility as a Swap Execution Facility or Designated Contract Market, as required.
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