Actual delivery of a commodity after an exchange exempts you from commodity futures regulations, so what the heck counts as "actual delivery" of bitcion?

Steptoe and Johnson, which has many Bitcoin industry clients, is asking that the commission clarify what constitues as “actual delivery” of bitcoins after a transaction.

As Houman Shadab, Andrea Castillo, and I explained in one of the first law review articles on this topic, this matters because if a trade results in actual delivery of bitcoins (rather than deferred delivery or simply receiving contract rights to bitcoins) the exchange is exempt from certain commodities futures regulations.

The recent CFTC order against Bitfinex has prompted this call for greater clarity. The petition explains:

In the Bitfinex Order, the Commission found that Bitfinex, a Hong Kong based online platform for exchanging and trading cryptocurrencies, violated certain CEA provisions by engaging in retail-financed commodity transactions in bitcoin that did not result in “actual delivery” under CEA … Specifically, the Commission found that the margin transactions were within the scope of the Retail Commodity Transactions provision because the transfer of cryptocurrency from one person’s account to another’s did not satisfy the requirement of “actual delivery” to exclude the transactions from the jurisdictional reach of the CEA.

If the Commission takes up such a rulemaking, we’ll be looking at whether “actual delivery” can be said to take place when ownership of bitcoin is changed on a third party’s books, or only when a transfer happens on the blockchain. And when does a transfer actually happen on the blockchain? Fun times ahead.