In a move to challenge the U.S. Securities and Exchange Commission's (SEC) regulatory authority, cryptocurrency exchange Bitnomial has filed a lawsuit against the SEC, arguing that the regulator has overstepped its bounds in attempting to oversee a proposed XRP futures contract in conjunction with the Commodity Futures Trading Commission (CFTC).
The SEC claims that XRP futures are security futures, which fall under the joint jurisdiction of both the SEC and CFTC, unlike non-security futures that are solely subject to the CFTC's authority. According to Bitnomial, this would require the company to comply with additional SEC requirements, including registering as a national securities exchange and submitting to the SEC's jurisdiction.
However, Bitnomial asserts that XRP futures fall exclusively within the CFTC's purview and that the SEC's involvement would significantly increase the company's regulatory burden. The exchange had self-certified that the XRP futures did not violate CFTC regulations on August 9.
Bitnomial disputes the SEC's classification of XRP as an investment contract and, by extension, a security, and therefore argues that XRP futures are not security futures. This lawsuit follows a similar filing by Crypto.com, which responded to an SEC warning of potential enforcement action by taking a proactive stance against the regulator's 'regulation by enforcement' approach, citing its harmful impact on over 50 million American crypto holders. The SEC has previously alleged that Ripple, the issuer of XRP, has violated securities laws by selling the token. In a recent ruling, a federal judge ordered Ripple to pay $125 million for violating federal securities laws in its sale of XRP to institutional clients, although the judge found that selling XRP to retail clients through secondary markets did not constitute a violation.
The SEC is currently appealing this decision.