A New York court Monday directed the Commodity Futures Trading Commission (CFTC) to provide opinion on Telegram’s battle with the United States Securities and Exchange Commission.
Although the legal notice didn’t specify the issues that the CFTC was invited to express its views on, the hearing will likely center on this key question: whether Telegram’s token, or grams, is a “security” or ‘commodity’ at the time of the launch of its associated TON Blockchain.
Due to the novel issues that are raised by a back-and-forth battle between the SEC and Telegram, the CFTC’s opinion will reverberate within the blockchain industry and far beyond.
“The Office of General Counsel of the United States Commodities Futures Trading Commission is respectfully invited to express its views on the issues presently before the Court in the above-captioned action in which its interests may be implicated. Leave is granted to file a written submission, which may take the form of a letter,” federal judge Kevin Castel said.
Telegram needs a few weeks to gather requested details
One of the first things the CFTC will be required to clarify about Telegram’s project is whether owning the associated token, Gram, is the same as buying stocks or similar assets.
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The CFTC, which is tasked with regulating commodity, futures and derivatives markets, said in 2015 that cryptocurrencies are commodities. However, the CFTC’s jurisdiction is implicated when a virtual currency is used in a derivatives contract, or if there is fraud or manipulation involving a coin being traded.
On its part, Telegram argued its token is not a security, and the US watchdog should not be able to force the company to produce documents or witnesses about its $1.7 billion worth ICO.
The NY court sought the CFTC’s intervention a few weeks after the same judge ordered the encrypted messaging app to disclose its bank records by February 26. Telegram has already presented a schedule for the review of its financial information and informed that it needs around 5-7 weeks of time to gather SEC requested details.
Although the agency claimed that the information was central to its investigation of Telegram’s ICO, the judge limited the scope of the documents the messaging app must produce. But while Telegram’s lawyers wanted the SEC request to be thrown out, calling it an “unfounded fishing expedition,” the watchdog was granted access to limited financial information to the extent necessary for its investigation.