WASHINGTON — Whether bitcoin is actual currency is at the forefront of a first-of-its-kind money-laundering case in Florida to be decided Friday.

In February 2014, Michel Espinoza was arrested in a Miami Beach motel for agreeing to sell $30,000 worth of bitcoin to an undercover police officer he had met on an exchange site called LocalBitcoins.com.

Prosecutors charged that Espinoza violated Florida statutes on money laundering and for operating an unlicensed money transmitting business.

But the defense has argued that these laws do not apply to Espinoza's case, because he was not selling currency — he was selling bitcoin.

"It's just like you selling your own personal property," Rene Palomino Jr., Espinoza's attorney, said in a court filing. "Since bitcoins are 'goods,' Espinoza's alleged conduct is excluded from the definition of the term 'money transmitter' " under both state and federal law.

The case highlights a conundrum that has confused digital currency companies and state regulators alike: how to deal with a digital asset that is not a legal tender but can still hold value.

"Florida is dealing with the same definitional issues that many other states are dealing with, and that is how the terms currency, money, money transmission and even monetary value are defined," said Carol Van Cleef, a partner at Manatt, Phelps & Phillips.

The question is being addressed in various ways by the states' governing bodies. North Carolina's legislature on Monday passed a bill to modify the definition of money transmitters to account for virtual currency companies.

In New York, the state's financial regulator took the matter into its own hands last year by creating the BitLicense, which implicitly acknowledges that bitcoin is a store of value.

Even federal regulators are divided about how to address bitcoin: the Internal Revenue Service regards it as property, whereas the Treasury Department's Financial Crimes Enforcement Network regulates it as a currency.

"The U.S. state and federal government is highly fragmented and each seem to have their own view on this," said Perianne Boring, the founder and president of the Chamber of Digital Commerce.

"At the Chamber, we recognize bitcoin as a digital asset because depending on the use case it can take on characteristics of all of the above" — from a property or commodity to a currency or securities instrument, Boring added.

In 2008, Florida changed its definition of money transmitter to account for companies dealing with virtual currency — but the modification was not wide-ranging enough, according to Van Cleef.

"Florida actually did intend to cover digital currencies," she said.

But it did not address how money exchanges — which cannot be performed without a license — could account for virtual currencies, she added.

"If you're giving me the digital currency in exchange for [dollars] in a face-to-face transaction, you're not moving it to another place or you're not moving it to another person," Van Cleef said.

The matter has been placed in the hands of Judge Teresa Pooler of the Miami-Dade Circuit of Florida, who is expected to deliver a ruling on the issue Friday.

"The status of the law has not caught up with technology," Palomino said. "Everybody thought [bitcoin] was going to be a fad, it would just go away. And guess what? I think it's going to stay."

In a press release after the arrests, authorities acknowledged the novelty of the case.

"All of us in law enforcement know that criminals are always seeking new ways to make their activities profitable," said State Attorney Katherine Fernandez Rundle, noting that the U.S. Secret Service had participated in the investigation. "BitCoins are just a new tool in the cyber criminal's toolkit." Her office declined to comment further on the case.

Beyond Florida, the case could serve as an example for other states, digital currency advocates say.

"If the judge rules that bitcoin is a currency , it would only apply in that state," Boring said. "However, other states could use that decision or ruling as persuasive material in their own legal systems or legislation to guide their own policy making or case decisions."

The case is likely to be litigated after Pooler's ruling. Both parties confirmed they would go to trial if they lost.