Florida LocalBitcoins User Loses Bid to Dismiss Money Transmitter Charge

A Florida circuit court judge has issued a ruling suggesting that individual bitcoin sellers can be considered money transmitters under state law.

AccessTimeIconDec 12, 2014 at 10:58 p.m. UTC
Updated Mar 6, 2023 at 2:56 p.m. UTC
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A Florida circuit court judge has issued a ruling suggesting that individual bitcoin dealers could be considered money transmitters under state statutes.

Lawyers representing the defendant, 29-year-old Pascal Reid, had sought to strike down the charge, one of three, on the interpretation that a state resident would need to be a money services business (MSB) or operating on behalf of such an entity to be in violation of the law.

The decision, delivered today by Circuit Court Judge Fleur Lobree, argued that a "plain reading" of the statute infers that the state's definition of an MSB includes "any person [...] who acts as a payment instrument seller, foreign currency exchanger, check casher or money transmitter", and that such persons must be licensed to perform these activities.

Lobree's decision reads:

"Florida statutes prohibits a person from engaging in a money services business without a license. Therefore, [...] the defendant meets the requirements to be charged with engaging in the money service business as a money transmitter without being licensed."

The update is the latest in the case of Florida native and LocalBitcoins user Reid, who in February was arrested and charged with violating the state's anti-money laundering (AML) and money transmission laws.

Reid was arrested alongside Michell Abner Espinoza for agreeing to sell $30,000 worth of bitcoin to undercover officers at 20% above market value. Most recently in May, the judge struck down a money laundering charge issued in the case.

Notably, only Reid has moved to dismiss the money transmission charge, though both parties were charged with the crime at the time of arrest.

Opinion blasted by lawyer

Speaking to CoinDesk, Reid's attorney Ronald Lowy took aim at the decision, while emphasizing his belief that his client will be vindicated at a jury trial next year.

"This law wasn't intended to apply against individuals who simply exchange bitcoins," Lowy said. "It would be no different than if an individual were to sell rare coins, rare stamps or to conduct a garage sale and give anything of value in exchange for currency."

Lowy argued that the judge's interpretation of the law is overly broad and unlikely to hold up in court, implying that it could capture those who hold anything of value and seek to exchange it for currency.

"That would basically make everyone in our capitalist society in violation of the statute," he added.

Further, he stressed that the decision did not address the fact that bitcoin is not considered to be a currency under US law. Lowy asserted that such a definition should not apply as bitcoin is not listed as a currency or backed by a government entity, though the judge's statements suggest it could be considered a "payment instrument".

Impact unknown

What the case will mean for the bitcoin community is less clear. The Bitcoin Foundation had previously filed an amicus curiae in the case, arguing that the outcome would have a great impact on all bitcoin users in the US.

At the time, Brian Klein of the Foundation's Legal Advocacy Committee, wrote in a blog post :

"The foundation’s position at its core is this: state prosecutors are improperly applying Florida statutes regulating 'money service businesses' to individuals conducting peer-to-peer sales of bitcoins."

Lowy indicated that it remains too early to appeal the judge's decision, and expressed his belief that, ultimately, a jury would help overrule the determination.

"We'll have to wait for the trial, but we're confident that we'll likely win the trial when the jury looks at the facts," he said.

CoinDesk is monitoring this developing story.

CoinDesk has will continue to monitor this story.

Image via Shutterstock

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