Court Hands CFTC Full Reins Over Binary Options
The Ninth Circuit just ruled that the Commodity Futures Trading Commission can sue a California man for running an unregistered binary-options platform. The decision hands the agency broad authority to police any product that looks like a futures contract, even if the underlying asset is forex or crypto.
James Devlin Crombie operated an online site that let retail traders bet on whether certain currency pairs would rise or fall within short time windows. The CFTC sued, arguing the contracts were off-exchange commodity futures. Crombie countered that the trades were spot forex transactions, which fall outside the agency’s reach. The district court sided with the regulator and ordered $1.8 million in restitution and penalties; Crombie appealed, claiming the CFTC lacked jurisdiction.
A three-judge panel unanimously affirmed the lower court. Judges held that the contracts met the statutory definition of “commodity option” because traders could lose their entire premium and had no delivery obligation. The court rejected Crombie’s forex exemption argument, noting the products were neither spot transactions nor traded on a registered exchange. The ruling leaves intact the monetary judgment and permanently bars Crombie from commodities trading.
The decision clarifies that any leveraged, margined, or financed retail contract that settles in cash and references a commodity price can be classified as a futures or option contract. Regulators gain a clear precedent for targeting similar platforms, whether they trade forex, crypto, or other digital assets. Exchanges and DeFi protocols offering short-dated, cash-settled products now face elevated compliance risk, because the opinion treats economic substance over marketing labels.
For traders and platforms, the message is blunt: if a product behaves like a futures contract, the CFTC will treat it as one.