SEC investigation of Bitcoin-based stock sale could lead to broader regulation

In July of last year gambling site SatoshiDice.com was sold by its creator for 126,315 BTC (Bitcoins) which was roughly $11.5 million at the time. The deal, which was executed on the Romania-based Bitcoin exchange MPEx, has drawn the interest of the Securities and Exchange Commission (SEC). The agency sent MPEx operator Mircea Popescu a letter requesting paperwork related to the SatoshiDice sale, including any contracts signed with Erik Voorhees, the founder of the gambling site. The SEC isn't necessarily saying either MPEx or SatoshiDice broke the law, but it's in the process of deciding whether or not these sorts of stock sales executed as Bitcoin trades are legal in the US. If the federal government finds that American financial law has been violated, it could have serious consequences for the future of the virtual currency.

So far Bitcoin has escaped serious regulation in the US, but after the collapse of Mt. Gox, government agencies stepped up their efforts. Part of the trouble so far has been nailing down exactly what Bitcoin is. Federal Reserve chairwoman Janet Yellen has already said that it falls outside of her jurisdiction since Bitcoin is not issued by a central bank. The Commodity Futures Trading Commission is trying to determine if it could possibly be considered a commodity, while the SEC is working on whether or not it's a security. The key to its case will be whether or not MPEx represents an unlicensed securities trading platform, which would put it in violation of US law. Of course, whether or not the SEC even has any jurisdiction over the Romanian exchange or the foreign company at the heart of the investigation is another question entirely.