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- A new lawsuit by derivatives trading platform Bitnomial shows that the SEC moved to restrict it from issuing futures contracts for XRP, alleging it’s a security.
- The SEC’s encroachment came despite a direct ruling that XRP wasn’t a security and the agency’s commitment not to appeal the ruling.
When Judge Analisa Torres issued the final ruling that ended the multi-year legal battle between the SEC and Ripple over the security status of XRP, it appeared like the agency’s assault on the XRP ecosystem had finally ended. The regulator even committed not to appeal the ruling, giving XRP holders the assurance they needed to invest in their favourite token. However, the animosity from Gary Gensler didn’t end there, as a new lawsuit has revealed.
Bitnomial, a crypto derivatives exchange licensed by the CFTC in 2020 to serve US customers, filed the lawsuit in the Northern District of Illinois. It all stems from the exchange’s filing to list an XRP US Dollar Futures contract in August. Since XRP had been exempted by Judge Torres from securities classification, Bitnomial only applied for certification for the new product from the CFTC, the agency that regulates futures in the US.
However, Gensler’s army was quick to swoop in. As the Thursday filing revealed, the SEC claimed that the new XRP futures contract would violate federal securities laws as they are “security futures.” To list the new product, Bitnomial would have to comply with a host of additional SEC requirements, including registering as a national securities exchange, which is a tedious and costly process.
Bitnomial notes:
The SEC takes the view that the underlying asset, XRP, is an investment contract and, therefore, transactions in XRP constitute a security under the Securities Exchange Act of 1934.
Bitnomia further noted that it disagrees with this view, as does the Southern District of New York, which threw out this argument by the SEC.
The exchange added that even if it agreed with the SEC’s view, it can’t possibly comply with the legal requirements that come with it. This includes first registering XRP as a security, which can only be done by the asset’s issuer, in this case, Ripple.
Thus, the SEC has effectively blocked Bitnomial from listing XRP Futures.
As it stands, Bitnomial’s only option would be to submit to the SEC’s bullying and forgo listing the XRP futures contract “after investing substantial time and resources to fully comply with the CFTC’s listing requirements.”
The crypto community has weighed in on the SEC’s astonishing overreach and disregard of a court ruling.
“This is a low point even by SEC standards. Take a position in dealing with a party trying to list a futures contract that is inconsistent with what you told the court in another matter about the underlying asset,” said crypto lawyer Bill Morgan.
You have to read paragraph 34 to 36 of the complaint of Bitnominal against the SEC or you won’t believe me. SEC supported its assertion that XRP is a security by giving Bitnominal copies of its summary judgement briefs in SEC v Ripple but did not note that the court rejected the… https://t.co/pzJWaIdvVR pic.twitter.com/gIaD1j95qQ
— bill morgan (@Belisarius2020) October 11, 2024
Gensler’s overreach is so blatant that even his colleagues have turned against him. Commissioner Mark Uyeda told FOX Business yesterday that the SEC’s policies over the last several years have been “a disaster.”
🚨BREAKING: The commissioner of the SEC – Mark Uyeda says: "I think our policies and our approach over the last several years have been just really a disaster for the whole industry!" #XRP
There are two options for Gary Gensler:
1. He will be fired.
2. He will resign. pic.twitter.com/LpcnBElKfU— JackTheRippler ©️ (@RippleXrpie) October 10, 2024
Meanwhile, XRP changes hands at $0.5364, trading sideways over the past day to maintain its market cap just above $30.4 billion.
