A federal judge issued a 79-page order Tuesday establishing regulatory authority over virtual currency.

U.S. District Senior Judge Jack B. Weinstein of the Eastern District of New York issued the opinion granting standing to the Commodity Futures Trading Commission to exercise its enforcement power over virtual currency fraud.

The judge held that the Commodity Futures Trading Commission can regulate virtual currency as a commodity and exercise its jurisdiction over fraud that does not directly involve the sale of futures or derivative contracts.

Weinstein also issued a preliminary injunction in the commission's favor in a case against Cabbage Tech Corp., doing business as Coin Drop Markets, and Patrick K. McDonnell of Staten Island.

The CFTC sued McDonnell and his company, Coin Drop Markets, alleging operation of “a deceptive and fraudulent virtual currency scheme … for purported virtual currency trading advice” and “for virtual currency purchases and trading,” Weinstein said.

“Until Congress clarifies the matter, the CFTC has concurrent authority, along with other state and federal administrative agencies, and civil and criminal courts, over dealings in virtual currency,” Weinstein said. “An important nationally and internationally traded commodity, virtual currency is tendered for payment for debts, although, unlike United States currency, it is not legal tender that must be accepted.”

The litigation raised the issue of whether the CFTC has standing to sue defendants for alleged violations of the Commodity Exchange Act.

“Presented are two questions that determine the plaintiff's standing: (1) whether virtual currency may be regulated by the CFTC as a commodity; and (2) whether the amendments to the CEA under the Dodd-Frank Act permit the CFTC to exercise its jurisdiction over fraud that does not directly involve the sale of futures or derivative contracts,” Weinstein said. “Both questions are answered in the affirmative. A 'commodity' encompasses virtual currency both in economic function and in the language of the statute.”

Weinstein said the commission's broad authority “extends to fraud or manipulation in derivatives markets and underlying spot markets.” He also said the commission “may exercise its enforcement power over fraud related to virtual currencies sold in interstate commerce.”

David William Oakland of the CFTC served as lead counsel for the commission. He could not be reached immediately for comment.

McDonnell represented himself. “I'm not at liberty to discuss the case while it's pending,” he said Tuesday.

The judge included in the order as an appendix the written testimony of CFTC chairman J. Christopher Giancarlo before the U.S. Senate Banking Committee on Feb. 6 in Washington.

“Emerging financial technologies broadly are taking us into a new chapter of economic history. They are impacting trading, markets and the entire financial landscape with far-ranging implications for capital formation and risk transfer,” he said. “We are entering a new digital era in world financial markets. As we saw with the development of the internet, we cannot put the technology genie back in the bottle. Virtual currencies mark a paradigm shift in how we think about payments, traditional financial processes, and engaging in economic activity. Ignoring these developments will not make them go away, nor is it a responsible regulatory response.”