Bitrabo Editorial
Bitnomial Exchange, LLC has initiated legal action against the US Securities and Exchange Commission (SEC) as of October 10, disputing the SEC’s classification of XRP as a security. Filed in the United States District Court for the Northern District of Illinois, the lawsuit seeks both declaratory and injunctive relief against the SEC’s claim to oversee digital asset futures, which Bitnomial argues should fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC).
Bitnomial Challenges SEC’s XRP Classification
Bitnomial, which is a CFTC-approved designated contract market, has gained attention following the SEC’s opposition to its plans to offer XRP futures. The lawsuit highlights that, “The SEC claims authority over a product already governed by the CFTC.” This legal action emerged after Bitnomial self-certified with the CFTC to list the XRP futures contract, with trading expected to begin on or after August 13, 2024.
“Following its self-certification with the CFTC, the SEC reached out to Bitnomial regarding the future listing. During this dialogue, the SEC warned that proceeding with the listing of XRP Futures would breach federal securities laws,” the complaint states.
The SEC maintains that XRP is an investment contract and, therefore, a security. “The SEC contends that XRP Futures are classified as security futures, which fall under the oversight of both the SEC and CFTC. It also claims that Bitnomial must fulfill several SEC requirements to proceed with the listing, including registering as a national securities exchange,” Bitnomial notes.
The exchange counters this classification, pointing to a ruling from July 13, 2023, by Judge Analisa Torres in the Southern District of New York, which rejected the SEC’s arguments that XRP functions as a security in secondary market dealings.
Bitnomial’s attorneys assert, “We disagree with the SEC’s classification of XRP as an investment contract, and consequently as a security, and we challenge the idea that XRP futures qualify as security futures.” They argue that adhering to the SEC’s requests would be impractical, as it would necessitate registration as a national securities exchange, introducing excessive regulatory challenges and costs for Bitnomial.
Bitnomial is asking the court to declare that XRP futures do not constitute security futures and to prevent the SEC from claiming jurisdiction or taking any enforcement actions regarding the listing, trading, purchasing, or selling of these futures on its platform. “Such a declaration is sought before the contract listing to avoid exposure to SEC enforcement based on their interpretation of the law,” the firm states.
This lawsuit coincides with the SEC’s motion to appeal Judge Torres’ ruling filed on October 2, although specific details about the appeal remain unclear. On October 8, crypto exchange Crypto.com also initiated a lawsuit against the SEC following a Wells notice. Furthermore, Bitnomial’s legal move occurs shortly after Canary Capital filed with the SEC on October 8 to launch a spot XRP exchange-traded fund (ETF), shortly after a similar proposal from Bitwise.
As of the latest update, XRP was trading at $0.5344.