Ripple CEO Brad Garlinghouse has taken a firm stance against the US Securities and Exchange Commission (SEC) in two ongoing legal battles that highlight growing tensions between the cryptocurrency industry and regulators. In one case, Garlinghouse supports Chicago-based exchange Bitnomial in its preemptive lawsuit against the SEC, aiming to prevent what it sees as regulatory overreach. At the same time, Ripple has filed a cross-appeal against a court judgment that ordered the company to pay a $125 million fine, while the SEC seeks a larger penalty and continues its efforts to classify XRP as a security.
Brad Garlinghouse Pledges Support for Bitnomial as Exchange Takes on the SEC in Preemptive Lawsuit
Ripple CEO Brad Garlinghouse has thrown his support behind Chicago-based derivatives exchange Bitnomial as it sues the US Securities and Exchange Commission (SEC) over what it describes as regulatory overreach. Bitnomial, a vendor of XRP futures contracts, is seeking a declaration from a federal court in Illinois to stave off what it fears will be a ”compounding regulatory burden” imposed by the SEC.
Ripple, the company behind the XRP token, has been embroiled in a long-running battle with the SEC, which claims XRP should be classified as a security. However, a recent court ruling has declared that XRP does not qualify as a security, much to the SEC’s chagrin. Despite this legal clarification, the agency continues to press forward in its attempts to exert control over XRP and other digital assets, raising concerns within the crypto community about regulatory overreach.
Garlinghouse, who has been an outspoken critic of the SEC, wasted no time in supporting Bitnomial’s legal challenge. Taking to X, Garlinghouse lambasted the SEC, calling it a ”renegade agency” that is ”operating above the law.” He also pointed out that the agency is disregarding the court’s ruling on XRP’s non-security status.
In his statement, Garlinghouse emphasized the growing need to hold the SEC accountable for its actions. The SEC’s anti-crypto policy has reached new lows, ignoring the legal clarity provided by the courts, he said. The Ripple CEO added that his company would be closely monitoring the developments in the Bitnomial v. SEC lawsuit and exploring potential legal options to counter what he perceives as the agency’s overreach.
Garlinghouse’s comments come on the heels of Ripple’s own ongoing legal battle with the SEC. Although Ripple won a significant legal victory when a US judge ruled that XRP is not a security when sold on secondary markets, the court still imposed a $125 million fine on Ripple for past sales of XRP to institutional investors. Ripple has since filed a cross-appeal, challenging parts of the judgment, while the SEC is appealing the ruling in an attempt to maintain its stance that XRP is, and always has been, a security.
At the heart of Bitnomial’s lawsuit is the question of regulatory jurisdiction. The exchange, which offers XRP-based futures contracts, has already self-certified its offering with the US Commodity Futures Trading Commission (CFTC), the agency typically responsible for overseeing futures markets. However, the SEC has raised questions about whether XRP futures contracts should fall under its jurisdiction as well, given its ongoing stance that XRP qualifies as a security.
Bitnomial’s lawsuit aims to clear up this ambiguity by seeking a declaration from the US District Court for the Northern District of Illinois that XRP futures contracts are not securities. The exchange also seeks an injunction to prevent the SEC from asserting any jurisdiction over these contracts or taking further enforcement action.
According to Bitnomial’s attorney, Matthew F. Kluchenek of Katten Muchin Rosenman LLP, this case could have far-reaching implications for the broader crypto derivatives market. In a comment to Law.com, Kluchenek explained that the lawsuit touches on a key issue: which regulatory body should have authority over the trading of futures contracts on digital assets like XRP.
Kluchenek also noted that this case is unprecedented in that it tackles the ”security future component” head-on. “I am not aware of any litigation out there that tackles this issue of the security future component and seeks a declaration from that perspective,” he said. This means that the outcome of this lawsuit could set a legal precedent not only for XRP futures but for other cryptocurrency-based derivatives products as well.
The Ongoing Battle Between Crypto and Regulation
This lawsuit marks yet another chapter in the ongoing saga between the cryptocurrency industry and US regulators. For years, crypto firms have complained about regulatory uncertainty, especially concerning which agency has the final say over different aspects of digital asset markets. In the case of XRP, this ambiguity has caused significant market disruption, with exchanges delisting the asset and institutional investors backing away due to fear of enforcement actions.
The CFTC, which traditionally oversees commodities and futures trading, has generally taken a more crypto-friendly stance compared to the SEC. However, the SEC has aggressively pursued enforcement actions against crypto firms, arguing that many tokens, including XRP, meet the legal definition of securities and should therefore fall under its regulatory purview.
For Bitnomial and Ripple, the stakes are high. If the court sides with the SEC, it could open the door for even stricter regulations on XRP and similar digital assets, potentially stifling innovation in the US cryptocurrency market. On the other hand, a victory for Bitnomial could limit the SEC’s ability to regulate cryptocurrency derivatives, providing much-needed clarity for the industry.
Ripple CEO Brad Garlinghouse Confirms Cross-Appeal Against SEC as Battle Intensifies
Ripple’s legal saga with the SEC has entered yet another phase as the blockchain firm announced its decision to file a cross-appeal against the regulator’s ongoing pursuit of XRP. This move, coming on the heels of the SEC’s own appeal in early October, marks a critical juncture in a legal battle that has captured the attention of the global cryptocurrency community.
The appeal revolves around the $125 million civil penalty imposed on Ripple for certain sales of its digital token, XRP. This amount, while significant, is only a small fraction of the nearly $2 billion the SEC had originally sought in penalties from Ripple. However, the company’s CEO, Brad Garlinghouse, has made it clear that the legal fight is far from over. With the cross-appeal, Ripple seeks to challenge portions of the court’s final judgment, which was issued on Aug. 7, 2024.
In a recent tweet, Garlinghouse explained Ripple’s decision to escalate the case with a cross-appeal, criticizing the SEC for refusing to accept the court’s rulings and continuing its regulatory offensive. He reiterated sentiments he had expressed earlier in October, taking direct aim at SEC Chair Gary Gensler and the agency’s approach to cryptocurrency regulation.
He said that if the SEC and its Chair Gary Gensler truly cared about the rule of law, as they claim, they would accept their loss and move on. He went on to accuse the SEC of being more focused on creating uncertainty and disruption within the US cryptocurrency space than on offering regulatory clarity. “Under Chair Gensler, the agency is only interested in creating havoc—US innovation and technology be damned,” the Ripple CEO added, in a blistering critique of the agency’s enforcement actions.
This cross-appeal, Garlinghouse emphasized, represents a key opportunity for Ripple to definitively settle the long-running debate over whether XRP should be classified as a security, and whether the SEC has the authority to regulate it. “With our cross-appeal today, we’re looking forward to sealing the SEC’s fate and finally putting an end to the SEC’s regulation-by-enforcement agenda,” he declared.
Throughout the legal battle, Ripple has maintained that XRP is not a security, a position bolstered by a ruling in July 2024 when Judge Analisa Torres found that XRP, when sold on secondary markets, did not constitute a security. This was seen as a major win for Ripple and a pivotal moment for the broader cryptocurrency industry. However, Ripple was still fined for its sale of XRP to institutional investors.
Garlinghouse’s confidence in the cross-appeal stems from Ripple’s track record in court. He described Ripple as an industry leader in setting legal precedents for the regulation of digital assets and expressed optimism that the cross-appeal would further solidify Ripple’s standing as a champion for crypto firms in their battles against overreaching regulation.
”Ripple was the industry leader in the first go-round in court, and we look forward to leading the way in this round as well,” Garlinghouse said. He believes that a victory in this appeal could not only benefit Ripple but also set a legal precedent that would shape the future of digital asset regulation in the United States.
The SEC’s Enforcement Tactics Under Fire
Garlinghouse’s criticisms of the SEC’s regulatory tactics echo the frustrations of many within the cryptocurrency community, who have accused the agency of stifling innovation and driving blockchain companies out of the US. Ripple’s chief legal counsel, Stuart Alderoty, has also spoken out against the SEC’s approach, noting that the agency lost on key points during the initial litigation. He suggested that this was a significant reason why the SEC chose to appeal the decision.
The SEC’s lawsuit against Ripple, which was first filed in December 2020, has become a symbol of the agency’s broader regulatory strategy for digital assets. Under Chair Gensler, the SEC has ramped up its enforcement actions against cryptocurrency companies, often using lawsuits to determine whether specific tokens should be classified as securities. Critics argue that this “regulation by enforcement” approach creates uncertainty and hampers the ability of blockchain firms to innovate within the US.
This article was originally Posted on Coinpaper.com
