CFTC Pushes for Pre-Trial Win, Says Gemini “Seeks a Loophole” in Bitcoin Futures Case

News | July 8, 2024 By:

On Friday, June 21, 2024, the Commodity Futures Trading Commission filed a motion urging a New York federal judge to rule in its favor in a pre-trial win over claims against cryptocurrency exchange Gemini.

The CFTC has accused Gemini of providing incomplete information to regulators regarding a proposed bitcoin futures contract, which the agency argues misled them and could have impacted the evaluation of potential market manipulation.

In its latest court filing, the CFTC argued that Gemini is attempting to avoid responsibility by claiming the misstatements originated from Cboe Futures Exchange, the exchange that was proposed to list the bitcoin contract. The regulator stated that Gemini “seeks a loophole” and is “trying to heighten the burden by misstating basic legal standards.” Specifically, the CFTC alleged Gemini failed to disclose gaps in its self-trading prevention procedures, loans made to certain traders, and rebates or discounts given to market makers – all pieces of information the agency maintains were material to review the contract.

While Gemini has defended that the claims center around “omissions” that require proof of how the left out information would have made original statements false, the CFTC rejected this as an “illusory standard.” It noted identifying each of the 31 false or misleading statements made and explaining why the omissions rendered them inaccurate, fulfilling its legal burden. The exchange did not meaningfully argue against satisfaction of this standard, according to the filing.

Additionally, the CFTC argued determining Gemini should have known the data provided was incomplete does not require a jury and can be ruled on pre-trial. It does not matter if the misrepresentations were directly conveyed by Gemini or through Cboe, as statutes do not mandate the source of statements to be the regulated entity. The agency emphasized there is no dispute over what was said or that Cboe was authorized by Gemini to communicate the information subsequently deemed misleading.

In its response, Gemini had attempted to argue a narrow Supreme Court precedent required proof it individually “made” the statements at issue. However, the CFTC asserted such criteria in governmental cases allow for a broader read versus private plaintiff suits. A federal judge previously denied Gemini’s own pre-trial motion on these issues, finding “maker” status and legal requirements present factual questions for a jury.

Oral arguments on the CFTC’s motion have now been scheduled for July 23rd where both sides will present detailed evidence, while the related trial was postponed to January 2025.

Please contact BlockTribune for access to a copy of this filing.