Bitnomial Exchange, LLC has submitted filed a lawsuit against the U.S. 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 digital asset futures, which Bitnomial claims is exclusively provided by the Commodity Futures Trading Commission (CFTC) should be regulated. .
Bitnomial sues SEC over XRP classification
Bitnomial, a designated contract marketplace approved by the CFTC, is in the spotlight following his plans to list XRP Futures were challenged by the SEC. According to the complaint, “the SEC is exercising jurisdiction over a product that is already regulated by and subject to the exclusive jurisdiction of the CFTC.” The SEC’s intervention came after Bitnomial’s self-certification to the CFTC to list the futures contract, which was scheduled to trade on or after August 13, 2024.
“After filing the self-certification with the CFTC, but before Bitnomial released XRP Futures for trading, the SEC contacted Bitnomial to discuss the proposed listing. “In discussions with Bitnomial, the SEC alleged that Bitnomial would violate the federal securities laws if Bitnomial were to proceed with its proposed listing of XRP Futures pursuant to its CFTC self-certification,” the complaint reveals.
The SEC stated in its exchange with Bitnomial that the crypto asset is an investment contract and, by extension, a security. “The SEC asserted that XRP Futures are security futures subject to joint SEC and CFTC jurisdiction. The SEC further alleged that Bitnomial must comply with numerous additional SEC requirements before marketing these Futures, including the important task of registering as a National Securities Exchange (“NSE”) and submitting to the jurisdiction of the SEC,” Bitnomial wrote.
The stock exchange disputes this classification and emphasizes that the summary judgment of the Southern District of New York dated July 13, 2023 by Judge Analisa Torres rejected the SEC’s position that the token itself is a security in secondary market transactions.
Bitnomial’s legal counsel argues: “Bitnomial disagrees with the SEC’s position that XRP is an investment contract and therefore a security, and that XRP Futures are therefore security futures.” They further argue that compliance with the SEC’s requirements would be unfeasible because Bitnomial would be required to register as a national securities exchange, a process that would impose excessive regulatory burdens and costs on the company.
Bitnomial asks the court to declare that “Bitnomial is requesting this declaration before marketing the contract, which is contrary to the SEC’s interpretation of the law, which would expose Bitnomial to enforcement by the SEC,” the company wrote.
The lawsuit comes at a time when the SEC submitted a motion to appeal Judge Torres’ final ruling on October 2. The SEC has not yet made clear what it plans to appeal. On October 8, crypto exchange Crypto.com also sued the SEC after receiving notice from Wells. It is striking that Bitnomial’s complaint comes after Canary Capital submitted with the SEC on October 8 to launch a spot XRP exchange-traded fund (ETF), just days after a similar filing from Bitwise.
At the time of writing, XRP was trading at $0.5344.
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