But bitcoin isn't money. How can he plead guilty to running a money exchange, when the IRS has ruled it isn't money. He was only buying and selling a virtual property. Do we need to start arresting people who buy and sell high ticket items like wine or cars?
You're confused. The IRS said it's a property, but their opinion doesn't matter when it comes to regulatory issues. The various departments of the government are under no obligation to treat bitcoin the same.
It's stupid, but that's reality.