A recent ruling by an Illinois court has officially classified Bitcoin (BTC) and Ethereum (ETH) as digital commodities under the Commodity Exchange Act. While significant, this decision remains confined to Illinois and doesn’t reflect broader federal or multi-state policy. Here’s what you need to know about the legal landscape and practical regulatory impacts.
Key Court Precedents on Crypto Classification
U.S. courts have consistently treated BTC and ETH as commodities in multiple cases:
- CFTC v. McDonnell (2018)
New York’s Eastern District Court affirmed BTC as a commodity under CFTC jurisdiction, setting a benchmark for fraud cases involving virtual currencies. - CFTC v. My BigCoin (2018)
Massachusetts District Court ruled that virtual currencies qualify as commodities under the Commodity Exchange Act’s broad definitions. - Uniswap Lawsuit Dismissal (2023)
Southern District of New York Judge Katherine Polk Failla described BTC and ETH as "crypto commodities," distinguishing them from securities.
👉 Explore how CFTC oversight shapes crypto markets
SEC’s Contrasting Stance
While states and the CFTC lean toward commodity classification, the Securities and Exchange Commission (SEC) maintains a stricter view:
- Ripple (XRP) Case: SEC alleges XRP sales constituted unregistered securities offerings.
- Coinbase Lawsuit: Targets multiple tokens listed as "unregistered securities" on exchanges.
SEC Chairman Gary Gensler has repeatedly stated that most cryptocurrencies (excluding BTC) likely meet securities criteria under the Howey Test.
The FIT21 Bill: A Pending Federal Framework
The 21st Century Financial Innovation and Technology Act (FIT21) proposes clearer crypto regulations by dividing oversight between the SEC and CFTC. Despite House approval, its Senate passage remains uncertain amid presidential opposition.
Illinois’ Crypto Regulatory Framework
Illinois is emerging as a proactive regulator with policies mirroring New York’s BitLicense:
1. Licensing Requirements
- Background checks for companies and executives.
- Financial audits to prove operational stability.
- AML/KYC compliance mandates.
2. Tax Treatment
- Cryptocurrency treated as property for capital gains tax.
- Mandatory transaction record-keeping.
3. Consumer Protections
- Transparency rules for fees and services.
- State-run complaint systems for reporting fraud.
👉 Learn about compliant crypto operations in Illinois
Industry Adoption in Illinois
- Mining: Sangha Systems’ solar-powered mining facilities.
- Bitcoin ATMs: CoinFlip operates 2,500+ machines nationwide.
- Exchanges: FTX.US previously established a Chicago office.
FAQ: Addressing Common Queries
Q: Does Illinois’ ruling affect other states?
A: No—this is a state-specific decision without federal weight.
Q: Could ETH still be deemed a security?
A: Yes, if the SEC prevails in ongoing litigation or via future legislation.
Q: How should businesses prepare?
A: Prioritize compliance with state licensing, tax reporting, and consumer protection laws.
Q: What’s the timeline for FIT21?
A: Pending Senate review and potential presidential approval; delays are likely.