“Funds” Encompasses Virtual Currency: First Circuit Rejects Major-Questions Challenge and Affirms Federal Power to Police Unlicensed Bitcoin Transmitters

Introduction

United States v. Freeman, No. 23-1839 (1st Cir. July 29, 2025), is the first published federal appellate decision to squarely examine whether the “major questions doctrine” restricts application of 18 U.S.C. § 1960 and 31 U.S.C. § 5330 to peer-to-peer cryptocurrency traders. In upholding Ian Freeman’s convictions for operating an unlicensed money-transmitting business, conspiring to launder money, and evading taxes, the First Circuit clarified that:

the ordinary meaning of the statutory word “funds” already covers virtual currency such as bitcoin;
FinCEN’s decade-old decision to regulate virtual-currency exchangers is not the sort of “extraordinary” agency action that triggers the major-questions doctrine; and
Congress’s 2021 amendment adding “currency” and “value that substitutes for currency” to § 5330 codified, rather than contradicted, FinCEN’s pre-existing interpretation.

Because of its careful treatment of statutory text, legislative history, agency practice, and Supreme Court separation-of-powers precedent, the opinion will likely stand as the leading appellate authority on federal jurisdiction over cryptocurrency money services businesses (“MSBs”).

Summary of the Judgment

Judge Thompson, writing for a unanimous panel (Gelpí, Lipez, Thompson, JJ.), affirmed:

denial of Freeman’s motion to dismiss the § 1960 counts premised on the major-questions doctrine;
jury verdicts for conspiracy to operate an unlicensed MSB, conspiracy to launder money, and four counts of tax evasion;
district court’s post-verdict judgment of acquittal on the single substantive money-laundering count (insufficient evidence of Freeman’s knowledge) did not taint remaining counts; and
a below-Guidelines 96-month sentence as substantively reasonable.

The court conducted a detailed plain-meaning analysis of “funds,” canvassed Supreme Court major-questions cases (West Virginia v. EPA, NFIB v. OSHA, Biden v. Nebraska, etc.), and concluded that FinCEN’s regulatory position was well within previously delegated authority. Freeman’s sufficiency, evidentiary-spillover, and sentencing arguments likewise failed.

Analysis

Precedents Cited and Their Influence

West Virginia v. EPA, 597 U.S. 697 (2022) – The touchstone for “major questions”; used by Freeman to argue that regulating virtual currency is an “extraordinary” expansion of FinCEN’s power. The panel distinguished West Virginia by finding no comparable breadth or novelty.
Biden v. Nebraska, 600 U.S. 477 (2023); NFIB v. OSHA, 595 U.S. 109 (2022); Alabama Association of Realtors v. CDC, 594 U.S. 758 (2021) – Each involved billion-dollar, first-time assertions of agency power. Judge Thompson emphasized that FinCEN’s 2013 guidance was neither sudden nor economically transformative to the same degree.
United States v. Murgio, 209 F. Supp. 3d 698 (S.D.N.Y. 2016) and other district-court cases – Already held bitcoin to be “funds”; cited to support the panel’s plain-language reading.
Commodity Futures Trading Comm’n v. Schor, 478 U.S. 833 (1986) – Quoted for the canon that congressional reenactment without change (or codification of agency practice) signals approval.

Legal Reasoning

Plain Text – The court applied ordinary-meaning methodology: dictionaries equate “funds” with “money” or “medium of exchange.” Bitcoin plainly functions that way.
Structure and History – Section 5330 already covered “informal money transfer system[s]” outside conventional banking. Congress’s 2001 Patriot Act amendment intended to reach “hawala-type” underground transfers—functionally analogous to crypto.
Agency Practice – FinCEN has consistently treated convertible virtual currency as “funds” since 2013 guidance and 2011 rulemaking adding “value that substitutes for currency.” There was no reversal of prior disclaimers.
Subsequent Congressional Action – 2021 NDAA explicitly inserted “currency” and “value that substitutes for currency” into § 5330(d)(1). Far from repudiating FinCEN, Congress codified its approach; under Schor, that ratifies the agency interpretation.
Major-Questions Doctrine Not Triggered – The panel identified none of the “hallmarks”: (i) no unprecedented assertion; (ii) no conflict with broader statutory scheme; (iii) no encroachment on state prerogatives; (iv) modest economic burden (registration is free); (v) technical subject squarely within FinCEN’s AML expertise.

Impact of the Decision

The holding carries immediate and long-term consequences:

Criminal Enforcement – U.S. Attorneys can rely on § 1960 to prosecute unregistered crypto dealers without fearing dismissal under the major-questions doctrine.
Regulatory Clarity – FinCEN’s 2013 guidance—and the broader BSA/AML framework—now enjoys robust appellate ratification. Expect stricter registration enforcement and heavier emphasis on KYC/AML controls for OTC crypto sellers and kiosk operators.
Litigation Posture – Defendants in other circuits have advanced similar major-questions challenges; Freeman supplies persuasive, detailed rebuttal likely to influence sister-circuit panels and district courts.
Statutory Interpretation – The court’s refusal to treat new technology as per se outside old statutes reaffirms the “technology-neutral” reading of federal criminal laws.
Sentencing Guidance – Affirmance of a 96-month downward-variant sentence signals that courts may still impose substantial prison time where crypto is used to facilitate fraud, elder-abuse scams, or laundering.

Complex Concepts Simplified

1. Money Transmitting Business (MTB)

Think of an MTB as a middle-man moving value for other people. If you take cash, wire it, or swap it into bitcoin on someone else’s behalf, you are “transmitting funds.” Federal law requires such businesses to register with FinCEN and implement anti-money-laundering programs.

2. Major-Questions Doctrine

A judicial principle applied when an agency relies on an ambiguous statute to do something unusually big and politically sensitive. Courts then demand a clear statement from Congress. In Freeman, the court said regulating crypto exchangers is not “extraordinary” enough to engage that doctrine.

3. FinCEN Registration

Registration is a short electronic filing listing owners, addresses, and compliance contacts. It does not require pre-approval. Failure to register—not the absence of licensure—triggers § 1960 liability.

4. “Funds” vs. “Value that Substitutes for Currency”

Congress later added the longer phrase but, according to the court, “funds” already included anything that acts like money—physical cash, bank balances, and bitcoin. The add-on was clarifying, not transformative.

Conclusion

United States v. Freeman cements the view that cryptocurrency businesses fall comfortably within existing federal anti-money-laundering statutes and that efforts to invoke the major-questions doctrine will face stiff headwinds where Congress has spoken broadly and later ratified agency interpretation. The decision removes a key defense tactic, strengthens FinCEN’s hand, and underscores that innovators in the payment space cannot sidestep regulatory duties merely because their technology is novel. Future litigants will cite Freeman both as a doctrinal roadmap for resisting major-questions arguments and as a practical warning: when “peace, liberty, and morality” messaging masks large-scale, unregistered bitcoin dealing, substantial criminal exposure—and lengthy prison sentences—follow.