Recent developments have shattered the doubts in the community on how the U.S. Securities and Exchange Commission (SEC) classifies XRP and other digital assets.
The SEC’s recent appeal in the XRP lawsuit did not specify intent to challenge Judge Analisa Torres’s ruling of July 2023 or XRP’s security status, and some in the community believe the SEC won’t challenge that ruling.
However, the regulator recently classified XRP as a security in a different lawsuit, showing its stance and hinting that its appeal could challenge the July 2023 ruling.
The Long-running XRP Lawsuit
In a landmark decision last year, U.S. District Judge Analisa Torres ruled on the XRP lawsuit, rejecting the regulatory body’s blanket assertion that the digital asset constitutes a security in all instances.
This verdict was widely perceived as a significant victory for Ripple and had far-reaching implications for the broader cryptocurrency sector. Over a year later, the final decision was issued, putting an end to the lawsuit and cementing the cryptocurrency’s non-security status.
Building on this decision, Bitnomial took steps in August to leverage XRP’s non-security status. The exchange submitted an application to the U.S. Commodity Futures Trading Commission (CFTC), proposing the launch of an XRP futures contract. This move was predicated on the understanding that the digital asset, as per the court’s ruling, was not universally classified as a security.
However, the SEC intervened in Bitnomial’s plans. The regulatory body asserted its authority over the proposed XRP Futures contract, categorizing it as a security futures product. Furthermore, the SEC cautioned Bitnomial that proceeding with the launch without adhering to SEC regulations would constitute a violation of federal securities law.
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A Low Point for the SEC
In defending its position, the SEC gave Bitnomial three summary judgment briefs from its lawsuit against Ripple on August 23. These documents reiterated the SEC’s argument that Ripple had contravened Section 5 of the Securities Act through its XRP sales. The regulatory body maintained that the digital asset satisfies the criteria of security as defined by the Howey Test.
However, pro-crypto attorney Bill Morgan shared on X that the SEC’s communication with Bitnomial failed to acknowledge Judge Torres’s ruling, which explicitly stated that while certain token sales could be considered securities transactions, the token itself is not inherently a security.
Morgan described the SEC’s actions, saying “This is a low point even by SEC standards.” In response to the SEC’s assertions, Bitnomial has filed a lawsuit in an Illinois district court. The legal action directly challenges the SEC’s claim of regulatory authority over the proposed XRP Futures contract.
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