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Image source: https://www.flickr.com/photos/100239928@N08/

Image source: https://www.flickr.com/photos/100239928@N08/

In January, Federal prosecutors charged Robert Faiella and Charlie Shrem with a scheme to launder more than $1 million in drug money through now-shuttered online black marketplace Silk Road. A significant portion of case hinges on the idea that Faiella and Shrem were operating an unlicensed money-transmitting business, even though that transmission largely took place in bitcoin rather than dollars. But with bitcoin’s legal status in the U.S. seen in conflicting ways by various authorities, Faiella’s lawyers argued that the money-transmission charges should be dropped. If the IRS has declared that bitcoin is a commodity, they argue, it does not fall under the definition of “money” required for money laundering.

As Bloomberg reports, that argument was denied yesterday in a Manhattan court by U.S. District Judge Jed Rakoff, ruling that a nuance of semantics doesn’t change the fundamental charges by prosecutors. “Money in ordinary parlance means ‘something generally accepted as a medium of exchange, a measure of value, or a means of payment,'” Rakoff wrote in his opinion. “Bitcoin clearly qualifies as ‘money.’”

Faiella and Shrem’s trial is currently set for Sept. 22. Both men have pleaded not guilty.

Judge Rakoff’s ruling may echo for some time, as it adds yet another legally relevant, seemingly contradictory perspective about exactly what bitcoin is. At the time of Faiella and Shrem’s arrest, no Federal or state authority had crafted a clear policy on cryptocurrencies, or even defined them for legal purposes. Even now, Judge Rakoff’s ruling may be at odds with the IRS’s interpretation of U.S. tax law, significantly increasing the chances that Shrem and Faiella’s case, not to mention the looming case of alleged Silk Road mastermind Ross Ulbricht, could have valid technical grounds for appeal.

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