Regal Commodities Wins Margin-Call Fight as NY Court Enforces Arbitration, Rejects Glitch Defense
Regal Commodities v Tauber (2024 NY Slip Op 01736)
Court hands crypto broker victory on trading-account liability.
In a March 27 decision, New York’s Appellate Division, Second Department, ruled that Regal Commodities, a commodities and digital-asset brokerage, can pursue a former client for alleged margin shortfalls after the client claimed the platform “glitched” during volatile crypto trading. The panel rejected the client’s argument that the brokerage’s automated risk-engine was a “defective product” under New York law, finding instead that the margin calls arose from an ordinary contractual relationship governed by the account agreement.
The dispute erupted in early 2022 when bitcoin and ether prices swung more than thirty percent in a single session. Tauber, trading on margin, saw his account equity collapse below maintenance levels; Regal’s system automatically liquidated positions and then demanded an additional six-figure deposit. Tauber refused, arguing that a software error—not market moves—triggered the shortfall, and countersued under product-liability and negligence theories. Regal countered that its user agreement clearly shifted all execution risk to the trader and that disputes belonged in arbitration per FINRA-style clauses.
Writing for a unanimous bench, Justice Miller held that the brokerage’s risk-management software did not constitute a “product” for strict-liability purposes; rather, the platform merely executed the parties’ bargained-for allocation of risk. The court enforced the arbitration clause, stayed the litigation, and ordered Tauber to post collateral or face an immediate damages hearing. In short, the decision lets brokerages keep using click-wrap agreements to push crypto-trading losses onto customers so long as the contract is clear and arbitration is specified.
Translated into market terms, the ruling narrows the avenues disgruntled retail traders can use to challenge automated liquidations or claw-backs. Because the Second Department covers New York City—home to many trading desks and OTC crypto desks—platforms can now point to precedent when denying “glitch” excuses. That predictability should lower litigation reserves for exchanges and market-makers, but it also tightens the noose on users who treat margin trading like a heads-I-win-tails-you-lose proposition.
For traders, the message is blunt: if the contract says you eat the slippage, the courts in New York will probably make you swallow it.
