As a seasoned analyst with over two decades of experience in the financial industry, I have witnessed numerous regulatory battles unfold, particularly in the emerging field of cryptocurrencies. In this latest development, I find myself intrigued by the legal tussle between Bitnomial and the US Securities and Exchange Commission (SEC) over XRP futures.
On Thursday, October 10, crypto derivatives trading platform Bitnomial took legal action against the U.S. Securities and Exchange Commission (SEC) in an Illinois court. Bitnomial is challenging the SEC’s authority to regulate XRP futures contracts.
Back in August, I learned that Bitnomial had applied for futures contracts after the legal battle between the SEC and blockchain company Ripple concluded. As a derivatives trading platform, Bitnomial falls under the oversight of the Commodity Futures Trading Commission (CFTC), the regulatory body equivalent to the SEC in the U.S. The current price of XRP was around $0.54, with a 24-hour volatility of just 2.6%, while the market cap stood at a substantial $30.51 billion and daily trading volume reached $1.34 billion.
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 Securities and Exchange Commission (SEC) considers the primary asset, XRP, as an investment contract, making all transactions involving XRP classified as securities under the Securities Exchange Act. However, Bitnomial opposes this view of the SEC, stating that XRP isn’t an investment contract and, consequently, XRP Futures are not considered security futures.
US SEC Takes the War to XRP Futures
The U.S. Securities and Exchange Commission (SEC) labeling XRP futures as “security futures” has escalated the conflict between the securities regulatory body and the Commodity Futures Trading Commission (CFTC), both of whom have been vying for control over digital assets. In simpler terms, this means that both organizations are striving to establish their authority over cryptocurrencies like XRP.
The ongoing argument revolves around whether cryptocurrencies such as Bitcoin (BTC) and Ether (ETH) should be categorized as securities or commodities, with the status of these tokens being decided by courts in the absence of a definitive regulatory framework. Notably, the SEC has only declared Bitcoin and Ether as non-securities to date. Here are their current market details:
In addition to asking the court to verify that XRP futures are not classified as securities futures, Bitnomial also sought a court injunction barring the U.S. Securities and Exchange Commission (SEC) from asserting control over XRP futures. Bitnomial’s CEO, Luke Hoersten, told FOX Business that this action was taken to protect their operations.
Setting this precedent isn’t solely about XRP; it encompasses all digital assets. Unlike other American businesses embroiled in litigation with the SEC, Bitnomial hasn’t been charged with any wrongdoing. Consequently, we find ourselves in a distinct situation to advocate for a court ruling on whether XRP futures should be categorized as securities or commodities, following the groundbreaking ‘non-security’ determination in the Southern District of New York case.
Over the past week, the Securities and Exchange Commission (SEC) has encountered its second legal challenge. Previously, Crypto.com filed a lawsuit against the SEC, arguing that the commission had exceeded its authority by declaring that all cryptocurrencies should be classified as securities.
Industry Leader Support Bitnomial
A number of influential figures in the industry have voiced their backing for Bitnomial, criticizing the Securities and Exchange Commission (SEC) for obstructing derivatives exchanges from trading futures. Notably, well-known lawyer Bill Morgan stated that although the SEC submitted papers claiming XRP as a security, they failed to mention that the court rejected the SEC’s assertion that all sales of XRP at hand were investment contracts and determined that the token itself was not classified as a security.
The level of government corruption here is unprecedented, far beyond what I ever expected from this administration. It’s so severe that it makes me doubt the SEC can regain its sense of integrity under the present leadership (though my expectations were already low). Without significant reform, there seems to be no hope for improvement.
— Fred Rispoli (@freddyriz) October 11, 2024
Attorney Fred Rispoli described the situation as “advanced government corruption,” voicing his displeasure with the current management at the agency. He stated that such actions have eroded any remaining faith he had in the SEC’s ability to change, underlining the necessity of significant reform if there is to be any future optimism.
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2024-10-11 10:54