Retail Commodity Transactions

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This post builds upon an idea presented in Part 4 of current series of posts on considerations for investment funds and advisers related to cryptocurrency derivatives.

In particular, this post provides additional perspectives on the relationship of leverage, margin, and financing to two commodity interests: “retail commodity transactions” and a “swaps”.  We decided to present these comments separate from the current multi-part series on cryptocurrency derivatives, since the topic may appeal to a broader audience than funds and advisers.

This post was co-authored with Michael Selig, an associate attorney in the New York office of Perkins Coie.…

Continue Reading Swaps and Retail Commodity Transactions (Leverage, Margin or Financing: Will We Know It When We See It or Only After It Has Been Identified As Such?)

This post is the fourth in a series that outlines key considerations for investment funds and their advisers regarding the application of the U.S. commodity laws to cryptocurrency derivatives.  This post is intended to be a primer on the topic and is not legal advice.  You should consult with your counsel regarding the application of the U.S. Commodity laws to your particular facts and circumstances.

In this Part 4, we discuss the commodity interests that are likely to be of greatest interest to crypto funds and advisers: futures contracts, swaps and retail commodity transactions.

At the outset, a sincere thanks goes out to Conor O’Hanlon and Michael Selig for their invaluable assistance and time spent thinking through many of the issues that are at this heart of this post and, more generally, this series.…

Continue Reading Cryptocurrency Derivatives, Funds and Advisers: Key Considerations Under U.S. Commodity Laws (Part 4: About the Interests of Interest)

By Andrew P. Cross, Laurie Rosini, and Thomas Ahmadifar

On December 15, 2017, the U.S. Commodity Futures Trading Commission (the “CFTC”) issued a proposed interpretation of the term “actual delivery” as used in the provision of the Commodity Exchange Act (the “CEA”) that grants the CFTC explicit authority to oversee the marketplace for “retail commodity transactions.”  This is the second blog posting in a multi-part series (read Part 1 here) that will explore the regulation of retail commodity transactions and the CFTC’s recent proposed interpretation (the “Proposed Interpretation”), the issuance of which we believe represents a potentially significant milestone in the regulation of virtual currency transactions.  We continue our series with an examination of the Proposed Interpretation and its examples for what may constitute “actual delivery” of virtual currency.

Retail Commodity Transactions under Section 2(c)(2)(D)

As we explain in greater detail in Part 1, the CFTC has exclusive jurisdiction over the marketplace for “retail commodity transactions,” arrangements that Section 2(c)(2)(D) of the CEA describes as an agreement, contract, or transaction that is offered or entered into by a party:

  • On a leveraged or margined basis, or financed by the offeror, the counterparty, or a person acting in concert with the offeror or counterparty on a similar basis; and
  • To or with persons who do not qualify as either an eligible contract participant (“ECP”) or an eligible commercial entity (“ECE”).

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Continue Reading CFTC Virtual Currency Proposed Interpretation – Part 2

On December 15, 2017, the U.S. Commodity Futures Trading Commission (the “CFTC“) issued a proposed interpretation of the term “actual delivery” as used in the provision of the Commodity Exchange Act (the “CEA“) that grants the CFTC explicit authority to oversee the marketplace for “retail commodity transactions”.  This is the first blog posting in a multi-part series that will explore the regulation of retail commodity transactions and the CFTC’s recent proposed interpretation (the “Proposed Interpretation“), the issuance of which we believe has represents a potentially significant milestone in the regulation of virtual currency transactions.  We begin our series with a brief look at the history and background of the regulation of retail commodity transactions.
Continue Reading Retail Commodity Transactions Involving Virtual Currencies: An Overview of the CFTC’s Proposed Interpretation (Part 1)