A landmark decision by a federal judge has paved the way for FTX, one of the world’s largest cryptocurrency exchanges, to begin offering its services to US customers. The judge granted FTX’s motion to dismiss a lawsuit filed by the Commodity Futures Trading Commission (CFTC), which accused FTX of violating US laws by operating an unregistered derivatives platform.
The judge ruled that FTX’s contracts, which allow users to bet on the future price movements of various cryptocurrencies, do not fall under the CFTC’s jurisdiction because they are not futures or swaps. Instead, the judge said, they are “novel and unique” products that are “more akin to insurance contracts or binary options”.
The judge also noted that FTX has taken steps to exclude US customers from its platform, such as using geofencing technology and requiring users to verify their identity and location. The judge said that these measures show that FTX is not targeting or soliciting US customers, and that any US users who access the platform do so at their own risk and in violation of FTX’s terms of service.
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FTX is a Hong Kong-based company that offers a variety of crypto products, such as futures, options, leveraged tokens, and spot trading. It also operates FTX US, a separate platform that complies with US regulations and offers a limited selection of crypto assets. However, FTX US has faced many challenges in expanding its services, as it requires approval from each state regulator.
The ruling is a major victory for FTX, which has been expanding its global presence and influence in the crypto space. FTX, which is based in Hong Kong and registered in Antigua and Barbuda, boasts over 1 million users and handles over $10 billion in daily trading volume. FTX also owns Blockfolio, a popular crypto portfolio tracker app, and has secured naming rights deals with several sports teams and venues, such as the Miami Heat’s arena and the e-sports team TSM.
FTX’s CEO, Sam Bankman-Fried, hailed the judge’s decision as a “huge win” for FTX and the crypto industry. He said that FTX is looking forward to launching its US platform soon, which will offer a range of crypto products and services that comply with US laws and regulations. He also said that FTX is open to working with the CFTC and other regulators to foster innovation and growth in the crypto sector.
“This is a historic moment for FTX and for crypto. We are thrilled that the court has recognized our efforts to create a safe, secure, and compliant platform for our users. We are excited to bring our cutting-edge technology and products to the US market, and to contribute to the development of the crypto ecosystem in the US and around the world,” Bank.
The order, issued by Judge Richard Seeborg of the US District Court for the Northern District of California, grants FTX US a preliminary injunction against the Commodity Futures Trading Commission (CFTC), which had sued FTX US for allegedly violating the Commodity Exchange Act. The CFTC claimed that FTX US was offering unregistered futures contracts and swaps on crypto assets, and that it failed to implement adequate anti-money laundering and customer protection measures.
The judge ruled that FTX US had shown a likelihood of success on the merits of its case, and that the CFTC had not demonstrated that it would suffer irreparable harm if FTX US was allowed to continue its operations. The judge also noted that FTX US had taken steps to comply with the CFTC’s rules, such as registering as a swap execution facility and applying for a designated contract market license.
The order will enable FTX US to offer a wider range of crypto assets to its customers, including popular tokens like Bitcoin, Ethereum, Solana, and Dogecoin. It will also allow FTX US to compete with other crypto exchanges that have already obtained licenses or exemptions from the CFTC, such as Coinbase, Kraken, and Gemini.
The order is not final, however, as it is subject to appeal by the CFTC or modification by the judge. The order also does not affect the ongoing litigation between FTX US and the CFTC, which will proceed to trial unless the parties reach a settlement. Nevertheless, the order is a significant milestone for FTX US and the crypto community, as it signals a more favorable attitude from the courts towards crypto innovation and regulation.
