Bitnomial Exchange, LLC filed a lawsuit against the US Securities and Exchange Commission (SEC) and its commissioners on October 10, challenging the SEC’s claim that XRP is a security. The complaint, filed in the United States District Court for the Northern District of Illinois, seeks declaratory and injunctive relief against the federal regulator’s attempt to exercise jurisdiction over the digital asset future Bitnomial arguing that it should be exclusively regulated by the Commodity Futures Trading Commission (CFTC) .
Bitnomial Sues SEC Over XRP Classification
Bitnomial, a CFTC-approved designated contract market, has come under fire after its plans to list XRP Futures were challenged by the SEC. According to the complaint, “The SEC is asserting jurisdiction over a product that is already regulated and subject to the exclusive jurisdiction of the CFTC.” The SEC’s intervention came after Bitnomial’s confirmation with the CFTC to list the futures contract, which is scheduled to begin trading on or after August 13, 2024.
“After filing its certificate of self-certification with the CFTC, but before Bitnomial listed XRP Futures for trading, the SEC contacted Bitnomial to discuss the proposed listing. In discussions with Bitnomial, the SEC asserted that Bitnomial would be in violation federal securities laws if Bitnomial continues its targeted listing of XRP Futures pursuant to its CFTC certification,” the complaint revealed.
The SEC stated in its exchange with Bitnomial that a crypto asset is an investment contract and, by extension, a security. “The SEC asserted that XRP Futures is a futures security subject to joint SEC and CFTC regulation. The SEC has also confirmed that Bitnomial is required to comply with a number of additional SEC requirements prior to the listing of these Futures, including the important task of registering with the National Securities Exchange (“NSE”) and filing with the SEC,” Bitnomial wrote.
The exchange opposes this classification, insisting that the summary judgment of the Southern District of New York from July 13, 2023, of Judge Analisa Torres had rejected the position of the SEC that the token itself is a protection for secondary market activities.
Bitnomial’s legal counsel says, “Bitnomial disagrees with the SEC’s view that XRP is an investment contract and, therefore, a security, and that XRP Futures are thus a security future.” They also argue that compliance with the SEC’s requirements would be impossible, as it would require Bitnomial to register as a national securities exchange, a process that would impose undue regulatory burdens and costs on the company.
Bitnomial is asking the court to declare that XRP futures are not security futures and authorize the SEC to assert jurisdiction over them or pursue any enforcement actions related to the listing, trading, buying, or selling of futures on the Bitnomial exchange. “Bitnomial is seeking this declaration before entering into a contract contrary to the SEC’s interpretation of the law, which will expose Bitnomial to SEC enforcement,” the company wrote.
The case comes as the SEC filed a motion to appeal Judge Torres’ final decision on October 2. The SEC has not indicated it plans to appeal yet. On October 8, crypto exchange Crypto.com also sued the SEC after receiving Wells’ notice. Notably, Bitnomial’s complaint comes after Canary Capital filed with the SEC on October 8 to launch an XRP exchange-traded fund (ETF), a few days after a similar request from Bitwise.
At press time, XRP traded at $0.5344.
The featured image was created with DALL.E, a chart from TradingView.com