Yesterday, the California Department of Financial Protection & Innovation joined with the Commodity Futures Trading Commission and the Hawaii Department of Commerce and Consumer Affairs, Securities Enforcement Branch in filing suit in U.S. District court against a precious metals dealer, and its majority owner and sales agent. Among other things, the complaint alleges that the defendants made "knowing or reckless misrepresentations and omissions to prospective and existing customers intended to induce them to purchase precious metals from Red Rock, in particular silver and gold Canadian Red-Tailed Hawk (“RTH”) coins".
Many lawyers recognize the DFPI as the regulator and enforcer of California's securities law. The DFPI also enforces the California Commodity Law of 1990, Cal. Corp. Code § 29500 et seq. That law defines a "commodity" to mean, except as otherwise specified by the commissioner by rule or order, "any agricultural, grain, or livestock product or byproduct, any metal or mineral (including a precious metal set forth in Section 29515), any gem or gemstone (whether characterized as precious, semiprecious, or otherwise), any fuel (whether liquid, gaseous, or otherwise), any foreign currency, and all other goods, articles, products, or items of any kind". Because the Canadian Red-Tailed Hawk coins were allegedly silver and gold, they would seem to fall within this definition as a "precious metal" (Section 29515 defines "precious metal" as including silver and gold in coin, bullion, or other form).
"But al thyng which that shineth as the gold
Nis nat gold, as that I have herd told"*
However, the statute excludes from the definition of "commodity" a numismatic coin whose fair market value is at least 15% higher than the value of the metal it contains. The statute does not define "numismatic" and it does not appear elsewhere in the California Commodity Law. The term "numismatic" generally refers to the currency, coins and tokens. Thus, the phrase "numismatic coin" may be tautological. In general, the term has been used to refer to coins who value is derived more from their beauty, rarity and/or condition than their metal composition. See, e.g., Texas Admin. Code Title 34, § 3.336(a)(3).
How coins and the law are related
The word "numismatic" is derived from the Latin word nummus which means coin. Nummus is related to the Greek word νόμισμα, which also means coin, but more generally refers to anything sanctioned by custom or the law, νόμος.
* Geoffrey Chaucer, The The Canon's Yeoman's Tale.