Article I, Section 8 says that Congress may:

"To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;"

So the Constitution gives Congress not just the right to issue currency, but to regulate both its own currency and other currencies.

In any case, Shavers's argument was ridiculous to begin with. He claimed that his investments didn't fall under the umbrella of the SEC because Bitcoin isn't money. But the SEC regulates securities, not currency. A security is just a tradeable financial instrument. The subject of the security doesn't have to be, and often isn't, money. E.g. a share in a corporation is not backed by dollars, it's backed by an ownership stake in some legal entity.

Article I, Section 8: Says nothing about "other currencies," only the value of its own coined money and of foreign coin. I don't see it.

To be clear, I'm devil's advocate arguing that this probably shouldn't be an SEC case, not that he hasn't committed a prosecutable fraud.

Securities always represent a legal obligation to something. A stock represents legal ownership of a legally recognized organization. If this guy wasn't making such binding obligations, as I suspect he wasn't, it isn't a securities issue - just fraud.

Because applied this broadly, the SEC would therefore regulate as Securities Dealers: Ebay, Baseball Card publishers, and Blizzard's World of Warcraft.

The court ruling at issue [1] specifically addresses each of the legal elements of "security" and how they apply to the what Shaver is accused of doing.

[1] http://www.archive.org/download/gov.uscourts.txed.146063/gov...

Thanks. Still think this ruling is weird, but it sure is interesting.

I think the gap you're trying to carve out for bitcoin between U.S. money and "foreign coin" is a narrow and tenuous one.

You've got a good point that, depending on how Shavers's investment was structured, he might not have been issuing anything that could be called a security. But he was billing it as a "bitcoin hedge fund" so if there was some sort of tradable interest in the fund that would in fact be a security.

I'll have to dig in to federal law again, but I'm pretty sure the law does carve it out that way. And it seems legally weird to me that I as an American citizen can mine "foreign coin" in the US. But I see where you're coming from.

Actually I think there is a bit of a tradition of the SEC prosecuting people for purporting to sell securities, even if they legally weren't. So I'd say that should be the basis of prosecution as opposed to "Bitcoin = Money."

I'm mostly just sore that the SEC hasn't bothered to prosecute MF Global principals, as that was outright, straightforward Securities Fraud.

Possibly you could simply consider BTC a "non-state" foreign currency?

Or you could just recognize that the Exchange Act is an exercise of Commerce Clause power and not Coinage Clause power, so, while whether bitcoin is "money" within the sense of the definition in the Exchange Act is an issue, it is an issue completely unrelated to whether it is "money" at all in the sense intended by the Coinage Clause, much less whether it is "foreign money" or some other kind.

> if Bitcoin is a currency because it can be exchanged for dollars

From the decision: "It is clear that Bitcoin can be used as money. It can be used to purchase goods or services, and as Shavers stated, used to pay for individual living expenses. The only limitation of Bitcoin is that it is limited to those places that accept it as currency. However, it can also be exchanged for conventional currencies, such as the U.S. dollar, Euro, Yen, and Yuan. Therefore, Bitcoin is a currency or form of money, and investors wishing to invest in BTCST provided an investment of money."

Exchangeability for other currencies isn't the only factor, the real factor is "it can be used as money", and further, that the defendant in the case agreed that it can be used as money.

> I guess the SEC will crack down on fraudulent dealers on ebay now.

If they were selling securities contracts (which is the issue here) on ebay , the SEC would already be cracking down on them.

Shaver tried to argue that the contracts he was selling were not securities contracts because they were being sold for bitcoins rather than dollars, among other arguments.

Read the decision. The defendant in the case tried to argue "Bitcoin isn't money, so Bitcoin investments aren't securities". The judge ruled "it walks like a duck and quacks like a duck, it's a duck" and said that the prosecution under securities law can go forward.

It's also not saying Bitcoin is official legal tender, just that for purposes of investment and securities law, it's a form of "money" and fraud involving Bitcoin investments can be prosecuted under existing securities law.

I talked about the Commerce clause, and Coinage, not currency, as IIRC the Constitution didn't speak to paper money per se.