In the lawsuit, Bitnomial has challenged the SEC’s assertion that XRP futures contracts fall under its jurisdiction as “security futures”.
In the latest development on Thursday, October 10, crypto derivatives trading platform Bitnomial filed a lawsuit against the US Securities and Exchange Commission (SEC) in the Illinois district court. Bitnomial sued the top securities regulator over the claims that it holds jurisdiction over the XRP futures contracts.
Earlier this year in August, Bitnomial filed for the XRP XRP $2.09 24h volatility: 0.1% Market cap: $126.72 B Vol. 24h: $1.24 B futures contracts following the conclusion of the SEC lawsuit against blockchain startup Ripple. Being a derivatives trading platform, the crypto exchange comes under the jurisdiction of SEC’s sister regulator aka the US CFTC.
The lawsuit mentions that the US SEC had contacted Bitnomial quickly after its filing while asserting that XRP futures are classified as “security futures” under the joint jurisdiction of the SEC and CFTC.
The SEC warned that moving forward with the listing would violate federal securities laws. Additionally, the SEC informed Bitnomial that it would need to meet further requirements, including registering as a national securities exchange, before listing XRP Futures. However, the lawsuit from Bitnomial notes:
“The SEC takes the view that the underlying asset, XRP, is an investment contract and, therefore, transactions in XRP constitute a security under the Securities Exchange Act. Bitnomial disagrees with the SEC’s view that XRP is an investment contract and, therefore, a security, and that XRP Futures are thus security futures.”
US SEC Takes the War to XRP Futures
With the US SEC claiming that the XRP futures are the “security futures”, the regulator has taken the war further between the securities regulator and the commodities regulator CFTC. Both – the SEC and CFTC – have been seeking jurisdictional powers over digital assets.
The central debate continues to be whether cryptocurrencies should be classified as securities or commodities, with courts currently determining the status of certain tokens in the absence of a clear regulatory framework. The CFTC regulates futures contracts for Bitcoin BTC $90 836 24h volatility: 0.4% Market cap: $1.81 T Vol. 24h: $16.41 B and Ether ETH $3 119 24h volatility: 0.9% Market cap: $376.44 B Vol. 24h: $8.73 B , the only two digital assets the SEC has officially recognized as non-securities.
Apart from seeking judge approval that XRP futures are not securities futures, Bitnomial requested a court order preventing the US SEC from claiming authority over XRP futures. Bitnomial CEO Luke Hoersten told FOX Business:
“Establishing this precedent is not just about XRP. It’s about all digital assets. Unlike other US businesses in litigation with the SEC, Bitnomial has not been accused of wrongdoing. As such, we are in a unique position to push for a court decision on the securities or commodities classification of XRP futures following the landmark determination as a non-security in the Southern District of New York case.”
This is the second lawsuit faced by the SEC in a week’s time. Earlier this week, Crypto.com sued the SEC for overstepping jurisdiction in claiming that all crypto assets are securities.
Industry Leader Support Bitnomial
Several industry leaders have come in support of Bitnomial and slammed the SEC for preventing the derivatives exchanges from trading futures. Popular attorney Bill Morgan said that while the SEC submitted its documents claiming XRP as a security, it “did not note that the court rejected the SEC’s argument that all of the XRP sales at issue were investment contracts and found that the token itself was not a security”.
This is next level government corruption. It’s the kind of behavior that destroys any hope I had of SEC coming to its senses under the current regime (admittedly low). There is no hope without substantial change. https://t.co/VU1qV1bpzz
— Fred Rispoli (@freddyriz) October 11, 2024
Another attorney Fred Rispoli called it a “next level government corruption” while expressing frustration with the agency’s current leadership. Rispoli remarked that this behavior has destroyed his little hope for the SEC to change course, emphasizing that substantial reform is needed for any future optimism.
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