- Jurisdiction
- US Federal Law
There are multiple sites that claim that circumventing restrictions with margin trading by using VPN's or unlicensed platforms in the US are "against the law" for the trader, is this true?
"When American citizens and residents register with a crypto-margin brokers, they get a notice that this service is not allowed in their country. Technically, a US citizen can circumvent around this by using a VPN. However, doing so is a clear violation of the law and hence, it is not advisable to do so. If the platform discovers that a traders is a US resident, it could freeze your account and your funds. Additionally, there might a legal action against the trader."
another site however contradicts this and says,
"Margin trading is strictly controlled. It isn't illegal per se, but exchanges need to register and get permission from the CFTC. However, it is one many cypto exchanges are unavailable in the U.S. Both Kraken and Coinbase Pro disabled their margin trading products earlier this year."
So what is it? Is there an actual federal law that would prohibit such actions on the part of the trader or would an exchange just freeze accounts on part of their duty to uphold their end of the law?
There are some decentralized exchanges which wouldn't be able to freeze funds due to those contracts and funds being on that persons crypto wallets, and while they prohibit US customers, some don't even seem to bother with IP restrictions on their site.
Some sites make it sound like CFD's (Contract for differences) are illegal in general? I dont know if thats true and if legal margin trading like what Kraken employs, which seems to be one of the few licensed US margin traders, circumvents those restrictions in some way.
What would happen in the case of an IRS inquiry into the details of someone who reported income that was using margin in this way? Would it be illegal for an individual? Could they be prosecuted?
The idea that the government would prosecute traders for circumventing a law meant to protect them from undue risk would seem on par to giving the death penalty to someone who attempted suicide.
So what is the law? Could traders get in actual legal trouble for violating these terms of services or do exchanges just have a responsibility to uphold regulations on their platform and therefore the risk is only to ones assets or getting banned from the platform.
I don't personally care to hear about how crypto trading, or margin trading for that matter is a scam like many have stated on other crypto topics on this forum just looking for real facts on how the federal law operates in this regard.
"When American citizens and residents register with a crypto-margin brokers, they get a notice that this service is not allowed in their country. Technically, a US citizen can circumvent around this by using a VPN. However, doing so is a clear violation of the law and hence, it is not advisable to do so. If the platform discovers that a traders is a US resident, it could freeze your account and your funds. Additionally, there might a legal action against the trader."
another site however contradicts this and says,
"Margin trading is strictly controlled. It isn't illegal per se, but exchanges need to register and get permission from the CFTC. However, it is one many cypto exchanges are unavailable in the U.S. Both Kraken and Coinbase Pro disabled their margin trading products earlier this year."
So what is it? Is there an actual federal law that would prohibit such actions on the part of the trader or would an exchange just freeze accounts on part of their duty to uphold their end of the law?
There are some decentralized exchanges which wouldn't be able to freeze funds due to those contracts and funds being on that persons crypto wallets, and while they prohibit US customers, some don't even seem to bother with IP restrictions on their site.
Some sites make it sound like CFD's (Contract for differences) are illegal in general? I dont know if thats true and if legal margin trading like what Kraken employs, which seems to be one of the few licensed US margin traders, circumvents those restrictions in some way.
What would happen in the case of an IRS inquiry into the details of someone who reported income that was using margin in this way? Would it be illegal for an individual? Could they be prosecuted?
The idea that the government would prosecute traders for circumventing a law meant to protect them from undue risk would seem on par to giving the death penalty to someone who attempted suicide.
So what is the law? Could traders get in actual legal trouble for violating these terms of services or do exchanges just have a responsibility to uphold regulations on their platform and therefore the risk is only to ones assets or getting banned from the platform.
I don't personally care to hear about how crypto trading, or margin trading for that matter is a scam like many have stated on other crypto topics on this forum just looking for real facts on how the federal law operates in this regard.