Bitnomial files a lawsuit against the SEC and challenges its claim that XRP futures are securities

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The US Securities and Exchange Commission (SEC) faced a second dispute this week. On Thursday, Chicago-based digital asset derivatives exchange Bitnomial said it filed a lawsuit against the SEC for claiming XRP futures are “security futures” under its jurisdiction.

Bitnomial, regulated by the Commodity Futures Trading Commission (CFTC), self-certified the XRP US Dollar Futures contract in August following the final ruling in the SEC vs. Ripple.

In other words, the exchange said its XRP futures product meets certain standards and regulatory requirements under commodity laws and could list and trade the contract without explicit prior approval from the CFTC.

The SEC intervened in the process, contacting the exchange shortly after the filing. The agency stated that XRP Futures are “security futures,” subject to the joint jurisdiction of the SEC and the CFTC. They warned Bitnomial that going ahead with the listing would violate federal securities laws.

The SEC also stipulated that Bitnomial must meet additional requirements, including registration as a national securities exchange, before listing XRP futures.

Bitnomial is suing the SEC to challenge the declaration that XRP is a security. They argue that their futures contracts should not be regulated by the SEC.

“Bitnomial disagrees with the SEC’s view that XRP is an investment contract and therefore a security and that XRP Futures are therefore security futures,” the company said in its filing.

Luke Hoersten, CEO of Bitnomial, said the exchange’s clean record and the unique nature of its lawsuit against the SEC strengthened its position to seek a court ruling. He believes the case would set a legal precedent for how crypto derivatives like XRP futures should be regulated in the US.

The Bitnomial lawsuit comes shortly after Crypto.com, one of the world’s largest cryptocurrency exchanges, took legal action against the main US financial watchdog after receiving a Wells notice.

According to Crypto.com, the SEC has exceeded its legal authority in regulating crypto assets. The company argued that the agency’s classification of almost all crypto transactions as securities is inconsistent and illegal.

Since last year, the crypto industry has faced continuous enforcement actions and legal threats from the SEC. The list of companies under the SEC’s radar has grown, now including Consensys, Uniswap Labs, Crypto.com, and OpenSea, to name a few.

Ripple Labs, Binance, and Coinbase are three major crypto companies that are involved in the legal battle with the SEC right now. These cases are unlikely to be resolved anytime soon.

On Thursday, Ripple announced that it has filed a notice of appeal to challenge the SEC’s latest appeal. Both sides will settle in court and fight in court; the Ripple team said they are ready to fight again and win again.

Last July, Judge Analisa Torres of the Southern District of New York, who oversaw the SEC vs. Ripple has for the past three years ruled that sales of XRP by Ripple to exchanges did not constitute securities transactions, while sales to institutional investors did.

Following the court ruling, on August 7 of this year, Ripple Labs was ordered to pay $125 million to settle the year-long lawsuit, suggesting the case could be closed if the SEC did not appeal.

Both Ripple and the SEC said they won or partially won the case, but the SEC continued to seek remedies from Ripple in the form of large fines, and now an appeal to challenge the court’s ruling.

The dispute over the classification of XRP is ongoing, and these actions are likely to prolong the legal battle into next year.

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