Bitnomial has filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) and its five commissioners, accusing the agency of overextending its jurisdiction.

The company’s case disputes the SECs classification of XRP as a security, which the agency claims qualifies as an investment contract under the Securities Exchange Act.

The Case Details

The Chicago-based exchange, regulated by the Commodity Futures Trading Commission (CFTC), had requested to offer XRP US Dollar Futures in August. This followed a federal ruling that XRP is not considered a security in the SEC’s lawsuit against Ripple.

Shortly after filing, the SEC warned the exchange that moving forward with the listing could violate federal securities laws unless the firm complied with additional requirements. This would include registering as a national securities exchange.

According to the court document, the regulatory body informed Bitnomial that listing XRP Futures would require compliance with securities laws, as they would be classified as security futures under joint SEC and CFTC jurisdiction. However, the exchange has objected to that interpretation:

“Bitnomial disagrees with the SEC’s view that XRP is an investment contract and, therefore, a security and that XRP Futures are thus security futures.”

The company also claims the SECs stance overextends its jurisdiction into areas typically overseen by the CFTC.

As such, it is seeking a court declaration that XRP Futures should not be classified as security futures. This would protect the exchange from SEC enforcement. The firm also aims to prevent the agency from asserting jurisdiction over XRP Futures or taking any enforcement action relating to their future listing.

Industry-Wide Implications

“Establishing this precedent is not just about XRP; it’s about all digital assets,” said Bitnomial CEO Luke Hoersten in an interview with FOX Business.

He added that the firm, unlike others involved in legal disputes with the SEC, has maintained a clean compliance record. According to him, this places them in a unique position to seek a court ruling on whether XRP futures should be classified as securities or commodities.

The case follows similar legal action by Crypto.com, which recently sued the SEC after receiving a Wells notice indicating potential enforcement action. The firm has also accused the agency of overstepping its authority by classifying most crypto assets as securities.

The SEC also just logged a notice of appeal in the Ripple lawsuit. Meanwhile, Investment firm Canary Capital filed on October 8 to launch a spot XRP exchange-traded fund (ETF). This follows a similar proposal made by Bitwise just days earlier.