When local businesses in Cleveland Heights, Ohio decided to promote their neighborhood as a bitcoin-friendly business district, Brian Benchek wanted to join in. But he had just one nagging question: could he accept bitcoins for the lagers and IPAs made by his brew pub, the BottleHouse Brewing Co.?

Ohio, he knew, was picky about what could and could not be used to pay for booze. Gift certificates or beer tokens were verbotten. But what about bitcoin?

So a few weeks ago, Bencheck asked the Ohio Department of Public Safety for a ruling on whether Ohioans could pay for beer, wine, or liquor with bitcoin. And late last week, the department, which enforces the state's alcohol laws, gave him its answer: No way.

Ohio's bitcoin buzz-kill is the kind of thing that is going to continue to happen as regulators continue to struggle to get their minds around bitcoin and other digital currencies.

It's an odd ruling. Other states let you buy beer with bitcoin. We checked with California's Department of Alcoholic Beverage Control, for example, and they told us that it's no problem to accept bitcoin for booze in California. But Ohio's bitcoin buzz-kill is the kind of thing that is going to continue to happen as regulators continue to struggle to get their minds around bitcoin and other digital currencies.

Last month, the Internal Revenue Service ruled that bitcoin is not currency, and Bencheck thinks that this may have influenced the Ohio bureaucrats' thinking. "When I first went to them, they honestly had no idea what bitcoin was," he says. The state's liquor regulators "tend to be people that are maybe a little bit older and not hip to the world of technology."

The Ohio Department of Public Safety didn't return calls and email messages asking them to explain their thinking, but the agency told the Cleveland Plain Dealer that bitcoin "cannot be accepted as payment for alcohol in the State of Ohio."

Why, exactly, is unclear. The newspaper quotes Ohio Department of Public Safety Agent Eric Wolf as saying that bitcoin's value fluctuates too much to be recognized as a currency.

To Bencheck, the ruling doesn't make much sense. He intended to convert his bitcoin to cash immediately – something that any merchant can do with a bitcoin payment processor such as Coinbase or BitPay. But because of the government's guidance, he's not accepting bitcoin at the BottleHouse. "This is just another one of these ridiculous regulations that have no basis in reality and don't serve any purpose as far as public safety is concerned," he says. "I don't see the difference between using credit card and using this."

Update: April 30; 5:10 p.m. Pacific

After our story published, Eric Wolf, of the Ohio Department of Public Safety's investigative unit, sent us the following email, which suggests that Bencheck may be able to accept bitcoins – if he's willing to go to court.

This is our statement referring to bitcoins. No further information or comments will be provided.

The state of Ohio has not taken a position regarding the use of bitcoins. Rather, in keeping with guidance from the IRS that bitcoins are a form of “property” and not “currency” for tax purposes, the Ohio Investigative Unit may investigate the use of bitcoins as monetary payment for alcohol. If the Investigative Unit issues a citation out of such an investigation, a liquor permit holder may challenge the citation, and ultimately the Ohio Liquor Control Commission, and possibly an Ohio court, will determine whether the use was permissible. These comments are limited to the monetary payment for alcohol, and the Investigative Unit cannot speak to any to any other risks or legal consequences of accepting or using bit coins.

We've asked him if this means that bitcoins can be used to purchase alcohol in Ohio, and are waiting for his response.