Bitnomial takes SEC to court for classifying XRP futures as securities

Crypto derivatives platform Bitnomial has filed a lawsuit against the United States Securities and Exchange Commission, alleging that XRP futures are securities and subject to the agency’s jurisdiction.

In the lawsuit filed in Illinois federal court on October 10, Bitnomial claims the SEC overextended its jurisdiction by claiming that XRP futures contracts are security futures.

The firm claims the SEC is asserting its jurisdiction over a product “currently regulated by and subject to the exclusive jurisdiction of the Commodity Futures Trading Commission.” Therefore, the agency’s intervention multiplies and “compounds” the regulatory burden on Bitnomial.

According to the filing, Bitnomial filed a self-certification application with the CFTC in August with the aim of listing XRP futures contracts on its own exchange. However, the SEC contacted Bitnomial following the filing, claiming that XRP futures were securities and that the exchange was required to register as a national securities exchange before offering such products.

“The SEC effectively blocked Bitnomial from listing XRP futures,” the filing states.

Bitnomial argues that it cannot comply with the SEC’s requirements because XRP, as the underlying asset, is not registered as a security and the exchange does not have the authority to register it.

In addition, the derivatives platform noted the decision of New York District Court Judge Analisa Torres in July 2023, which concluded that institutional sales of XRP are considered securities transactions, but sales of the token in secondary markets are not.

Bitnomial cited this court decision in its lawsuit, arguing that the SEC’s position on XRP had already been challenged in court and partially rejected. It is currently seeking a court declaration that XRP futures are not securities and an injunction preventing the SEC from enforcing its regulations on the contracts.

However, the SEC argued that XRP was a security, arguing that Ripple’s digital asset sales should fall under securities regulations. On October 2, the SEC announced that it would appeal Judge Torres’ decision.

Ripple objected to the SEC’s position and responded with a cross-objection. The company had previously agreed to pay a $125 million penalty to resolve the initial lawsuit, but the final decision was still pending due to the SEC’s objection.

The SEC’s enforcement actions in recent years have drawn industry-wide criticism; market participants argue that the agency has overstepped its authority by classifying most digital assets as securities.