Chinese Court Declares Crypto Futures Trading as Gambling in Landmark Ruling

A Chinese court in Pingjiang County, Hunan Province, has ruled that futures trading on cryptocurrency exchanges constitutes gambling, leading to the conviction of multiple employees and agents associated with the BKEX exchange. This unprecedented decision reinforces China's regulatory stance against speculative digital asset trading, signaling broader implications for the country's crypto landscape.

BKEX and the Legal Battle

The case revolves around BKEX, a cryptocurrency exchange founded in 2018 by Ji Jiaming. Originally facilitating spot trading, the platform expanded into futures trading, offering high-leverage contracts to users. Between July 2019 and January 2022, BKEX changed its corporate registration multiple times before ultimately dissolving. By 2021, it had introduced a perpetual contract trading feature, enabling traders to leverage their positions up to 1,000 times using USDT.

The People's Court determined that this trading structure effectively encouraged gambling behavior by allowing users to speculate on Bitcoin (BTC) and Ethereum (ETH) price fluctuations with extreme leverage. Consequently, the exchange and its key figures were implicated in facilitating illicit betting.

Legal Consequences for BKEX Employees and Promoters

While the exchange's founder, Ji Jiaming, remains at large, several employees and external promoters were convicted under charges related to operating an illegal gambling platform.

  • Zheng Lei, a wallet engineer and head of the wallet department, received a 25-month suspended prison sentence and a 150,000 yuan (~$30,000) fine. Authorities also confiscated his illegally obtained earnings of 1.34 million yuan.

  • Wang, responsible for KYC authentication and cryptocurrency transactions, was handed a 23-month suspended sentence along with a 52,000 yuan (~$10,000) fine.

  • Dong, a recruitment agent who onboarded over 10,000 sub-agents and earned 33,558 USDT in commission, was sentenced to 18 months (suspended) and fined 35,000 yuan (~$6,400).

China’s Crypto Crackdown Intensifies

This ruling aligns with China's broader efforts to tighten its grip on cryptocurrency-related activities. Authorities have recently introduced stricter banking regulations to combat illicit crypto trading, reinforcing Beijing’s hardline stance against speculative investments. Despite these crackdowns, cryptocurrency adoption remains robust, with Chinese investors continuing to trade through decentralized platforms and offshore exchanges.

Interestingly, China’s regulatory environment remains inconsistent. While the latest ruling classifies crypto futures trading as gambling, a previous decision by China’s High Court acknowledged cryptocurrencies as legal property, recognizing their commodity status. This contradiction underscores the evolving and often ambiguous nature of China’s digital asset regulations.

Implications for the Crypto Industry

The court’s decision could have far-reaching consequences for the cryptocurrency sector in China. By setting a precedent against leveraged trading, regulators may push more crypto exchanges either underground or overseas. Additionally, the legal risks associated with crypto employment in China may deter professionals from working in the industry.

As China continues to grapple with the legal and economic impact of digital assets, the future of cryptocurrency trading remains uncertain. With growing global interest in decentralized finance and blockchain technology, Beijing’s next regulatory moves will be crucial in shaping the country’s role in the evolving crypto ecosystem.