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The United States Securities and Exchange Commission (SEC) still considers XRP a security despite a New York district court declaring the token a non-security last year.
Leading crypto derivatives exchange Bitnomial revealed this development yesterday in a lawsuit against the SEC.
Bitnomial Sues SEC Over Its Claim About XRP
The lawsuit, filed in an Illinois district court yesterday, challenges the SEC’s claim that it has regulatory authority over its planned XRP Futures contract.
For context, in August, Bitnomial applied with the U.S. Commodity Futures Trading Commission (CFTC) to launch a futures contract for XRP. The filing comes shortly after U.S. District Judge Analisa Torres issued the final judgment in the SEC v. Ripple case. It should be recalled that Judge Torres rejected the SEC’s claim that XRP is a security.
However, with Bitnomial seeking to launch an XRP Futures contract, the Wall Street top cop contacted the exchange, claiming that the product falls under its regulatory purview. According to Bitnomial, the SEC classified the XRP Futures contract as a “security futures.”
It also warned the crypto derivatives exchange that it would violate federal securities law if it launches the XRP Futures Contract without complying with its rules.
SEC Supports Its Assertion That XRP Is a Security
Notably, pro-XRP lawyer Bill Morgan called attention to a part of Bitnomial’s complaint that shows the SEC supporting its claim that XRP is a security.
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
According to Bitnomial, while discussing with the SEC, the regulator, on August 23, gave the derivatives exchange three summary judgment briefs from its lawsuit against Ripple to justify its claim that XRP is a security.
In the brief, the SEC argued that Ripple violated Section 5 of the Securities Act via its sales of XRP. Notably, the regulator claimed that XRP is a security defined by the Howey Test.
Reacting, Bitnomial noted that the SEC failed to mention that a New York district court rejected its claim that all sales of XRP at issue constitute investment contracts. Per Bitnomial, the court found that while certain XRP sales were securities, the token itself is not a security.
The SEC’s omission of Judge Torres’ verdict could be seen as misleading. The SEC only provided information from its summary judgment brief to support its claim that XRP is a security while ignoring the judge’s verdict, which says otherwise.
Will SEC Challenge XRP’s Non-Security Status?
It bears mentioning that the SEC is seeking to overturn the Ripple judgment through an appeal. While the SEC has not officially filed its brief, there are speculations that the regulator would not appeal XRP’s non-security status. The regulator admitted this last year during its failed interlocutory appeal attempt in the Ripple case.
According to the SEC, XRP, the underlying asset of Ripple’s securities transactions, is a computer code with no inherent value. Whether the SEC would change this position and challenge XRP’s non-security status in its appeal brief remains unclear.