Bitnomial, a cryptocurrency derivatives exchange, has sued the U.S. Securities and Exchange Commission (SEC) for jurisdiction over XRP futures contracts. This lawsuit is based on the SEC’s position that XRP futures are “Security Futures” and therefore it has the right to regulate. This legal action is taking place at the background of the already existing conflict between Ripple and the SEC over the status of XRP.
In August, Bitnomial sought approval to list its XRP-USD futures contract after a court decision in the SEC lawsuit against Ripple found that XRP was not a security in exchange transactions. Nonetheless, the SEC kept on insisting that XRP is a security, hence, Bitnomial’s legal proceedings.
The US SEC reached out to Bitnomial after the filing and claimed that XRP futures fall under the purview of both the SEC and the CFTC. The SEC also demanded that Bitnomial should register as a national securities exchange before it could offer XRP futures.
The cryptocurrency derivatives exchange disagrees with such categorization because it holds that XRP is not a security, and thus, the CFTC should be the only regulator to govern XRP futures just like it is with bitcoin and ether futures.
The matter of the status of XRP as security has been one of the key issues in the lawsuit between Ripple and the SEC. In July, a federal judge said that Ripple’s sales of XRP on exchanges were not securities, but institutional sales were considered securities. While the SEC has decided to appeal the decision, Ripple has filed a cross-appeal.
Bitnomial’s case forms part of the increasing list of legal battles that concern the SEC’s control over digital currency. According to Bitnomial’s CEO, Luke Hoersten, this lawsuit is significant not only for XRP but for all digital assets. He emphasized that Bitnomial is in a unique position, as it has not been accused of wrongdoing, to push for regulatory clarity.
Moreover, the CFTC currently oversees futures contracts for bitcoin and ether, which the SEC has acknowledged are not securities.
The cryptocurrency derivatives exchange has however argued that XRP futures should be treated the same way, with the CFTC having primary oversight. In its lawsuit, it is asking the court to declare that XRP futures are not securities futures and to prevent the US SEC from asserting jurisdiction over the contracts. The exchange believes that clearer regulations are essential for the cryptocurrency market to thrive.
Ripple CEO Brad Garlinghouse has also condemned the SEC’s recent activities, especially after the SEC charged Chicago-based Cumberland DRW LLC with operating as an unregistered dealer in the crypto market. The SEC alleged that Cumberland conducted more than $2 billion in transactions classified as securities without proper registration.
Moreover, Crypto.com sued the regulator this week, accusing it of exceeding its mandate by classifying several tokens listed on the platform as securities.
This criticism is in line with that of SEC Commissioner Mark Uyeda, who has expressed concerns with the agency’s attitude towards cryptocurrencies. According to Garlinghouse, the SEC’s action against Cumberland is an example of overregulation of the industry, citing the lack of clarity on the laws governing cryptocurrencies.
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