Judge Katherine Polk Failla of the United States District Court is also in charge of the case against cryptocurrency exchange Coinbase brought by the Securities and Exchange Commission.
In today’s legal environment, where the distinction between a cryptocurrency and a commodity is more important than ever, a landmark decision has come out of a US District Court. On August 30, Judge Katherine Polk Failla dismissed a class-action lawsuit against the decentralized exchange Uniswap while referring to Ether as a “crypto commodity” and bringing it to the center of the legal discussion.
Defining the Boundaries of Jurisdiction
The judge’s dismissing decision has significant ramifications. She based her argument on the description of ETH and Bitcoin as “crypto commodities” as she dismissed a claim made by Uniswap users who claimed damages as a result of fraudulent tokens on the platform. She based her decision to dismiss the complaint on this fundamental disparity and voiced uncertainty about the Exchange Act’s applicability to Uniswap’s token sales.
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Judge Failla’s foray into the cryptocurrency world is not new. Notably, she preside over the SEC action against Coinbase and previously handled cases involving Tether and Bitfinex that were connected to the cryptocurrency industry.
Related: SEC Likely to Approve Multiple Ether Futures ETFs in One Go
A Shifting Regulatory Landscape
Although not an explicit legal definition of Ether’s position in the United States, Judge Failla’s statement comes to light at a time when courts are defining the legal identity of cryptocurrencies. As seen by the July verdict that categorized XRP as a securities when offered to institutional investors, recent judicial rulings have been influencing the parameters of crypto legislation.
The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), two U.S. financial watchdogs, are engaged in a tug of war about who has jurisdiction over cryptocurrencies across regulatory channels.
The CFTC claims control over Ether and other cryptocurrencies as commodities, despite SEC Chair Gary Gensler’s assertion that everything “other than Bitcoin” is under his agency’s authority. The CFTC’s opinion on the law was made clear in its March lawsuit against Binance for purported violations of the Commodities Exchange Act. Congress is debating legislation that would clarify regulations for the world of digital assets as this jurisdictional jigsaw takes shape. These proposals call for varied degrees of SEC and CFTC authority separation.
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Proposals like the Financial Innovation and Technology for the 21st Century Act, intended to classify cryptocurrencies as securities or commodities, are part of the developing environment. As an alternative, the Digital Commodity Exchange Act envisions the registration and oversight of crypto spot exchanges by the CFTC.
Last but not least, the Digital Asset Market Structure Bill adds a novel requirement: before achieving commodity status, cryptocurrencies would need to pass SEC certification, demonstrating their decentralization. Judge Failla’s designation of Ether as a “crypto commodity” in a field known for its complexity opens a new chapter in the story of how cryptocurrencies are seen from the perspective of law and regulation.
Related: CZ Warns of Phishing Attacks After Uniswap Founder gets Hacked