The People’s Court in Pingjiang County, Hunan Province, has determined that futures trading on a crypto exchange constitutes gambling, resulting in the conviction of several BKEX exchange employees and promoters for involvement in operating a casino. Despite the convictions, most sentences were suspended, raising questions about the implications of the ruling.
BKEX Exchange, founded by Ji Jiaming in 2018, came under scrutiny as the exchange facilitated cryptocurrency spot and futures trading. The court ruled that the exchange's introduction of perpetual contract trading, allowing users to leverage their bets using USDT stablecoin, encouraged speculative behavior akin to gambling, with leverage as high as 1,000 times.
The court stated that BKEX facilitated online gambling activities, gathering over 270,000 users for contract trading, generating substantial profits. One instance cited in the ruling involved Ji Jiaming's collaboration with Lei Le, resulting in net profits exceeding $54.7 million. With Jiaming evading authorities, the trial mainly targeted employees and agents, with various convictions and sentences handed down.
This development aligns with China's ongoing efforts to crack down on risky crypto practices, reflecting a broader regulatory stance against speculative investments in digital assets. While China's regulatory landscape remains intricate, the recent court decision on crypto trading as gambling contrasts with a prior acknowledgment of cryptocurrencies as legal property, indicating evolving attitudes towards digital assets.
Despite regulatory challenges, cryptocurrency adoption in China persists, with the country playing a significant role in the global crypto market. However, the classification of crypto futures trading as gambling could have far-reaching consequences for the industry in China, potentially driving exchanges underground or prompting relocations overseas to evade stricter enforcement measures.
The ruling may also dissuade professionals from entering the crypto sector in China due to legal risks. As the future of crypto trading in China hangs in the balance between regulatory scrutiny and market demand, the implications of this court decision on the industry's trajectory are uncertain, hinting at potential shifts in the landscape.