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Bitnomial drops SEC lawsuit ahead of XRP futures launch in the US
Crypto exchange Bitnomial has voluntarily dismissed its lawsuit against the US Securities and Exchange Commission ahead of launching its Ripple XRP futures in the United States.
The Chicago-based firm said in a March 19 statement to X that its XRP (XRP) futures are regulated by the US Commodity Futures Trading Commission and will be available from March 20 for current users.
“Bitnomial is launching the first-ever CFTC-regulated XRP futures in the US — physically settled for real market impact,” Bitnomial said.
“Plus, we’ve voluntarily dismissed our case against the SEC as regulatory clarity improves,” it added.
Source: Bitnomial
The exchange filed a self-certification with the CFTC to list XRP futures contracts on its exchange in August 2024. However, the SEC blocked the move, pushing for Bitnomial to register as a securities exchange before it could list the futures.
Bitnomial sued the SEC and its five commissioners on Oct. 10, accusing the agency of overextending its jurisdiction by claiming that XRP is a security.
Bitnomial’s XRP futures launch follows Ripple CEO Brad Garlinghouse’s March 19 announcement the SEC opted out of continuing an appeal against a ruling labeling XRP as not a security for retail sales.
A July 13, 2023 judgment from Judge Analisa Torres deemed XRP is not a security for retail sales; however, she opined it was when sold to institutional investors, as it met the conditions set in the Howey test. The SEC was appealing Torres’s decision.
The SEC initially launched legal action against Ripple Labs in December 2020, accusing the firm of illegally selling its token as an unregistered security.
Related: Vermont follows SEC’s lead, drops staking legal action against Coinbase
Under the Trump administration, the SEC has slowly been walking back its hardline stance toward crypto forged under former SEC Chair Gary Gensler’s reign, dismissing a growing number of enforcement actions against crypto firms.
The agency’s acting chair, Mark Uyeda, who took the reins after Gensler resigned on Jan. 20, flagged plans on March 17 to scrap a rule proposed under the Biden administration that would tighten crypto custody standards for investment advisers.
Uyeda also said in a March 10 speech that he had asked SEC staff for options to abandon part of proposed changes that would expand regulation of alternative trading systems to include crypto firms, requiring them to register as exchanges.
Magazine: SEC’s U-turn on crypto leaves key questions unanswered
Once, long ago, cryptocurrency companies operated comfortably in the US. In that quaint, bygone era, they would often conduct funding events called “initial coin offerings,” and then use those raised funds to try to do things in the real and blockchain world. Now, they largely do this “offshore” through foreign entities while geofencing the United States. The effect of this change has been dramatic: Practically all major cryptocurrency issuers started in the US now include some off-shore foundation arm. These entities create significant domestic challenges. They are expensive, difficult to operate, and leave many crucial questions about governance and regulation only half answered. Many in the industry yearn to “re-shore,” but until this year, there has been no path to do so. Now, though, that could change. New crypto-rulemaking is on the horizon, members of the Trump family have floated the idea of eliminating capital gains tax on cryptocurrency, and many US federal agencies have dropped enforcement actions against crypto firms. For the first time in four years, the government has signaled to the cryptocurrency industry that it is open to deal. There may soon be a path to return to the US. The story of US offshoring traces back to 2017. Crypto was still young, and the Securities and Exchange Commission had taken a hands-off approach to the regulation of these new products. That all changed when the commission released a document called “The DAO Report.” For the first time, the SEC argued that the homebrew cryptocurrency tokens that had developed since the 2009 Bitcoin white paper were actually regulated instruments called securities. This prohibition was not total — around the same time as The DAO Report’s launch, SEC Director of Corporate Finance William Hinman publicly expressed his views that Bitcoin (BTC) and Ether (ETH) were not securities. To clarify this distinction, the commission released a framework for digital assets in 2019, which identified relevant factors to evaluate a token’s security status and noted that “the stronger their presence, the less likely the Howey test is met.” Relying on this guidance, many speculated that functional “consumptive” uses of tokens would insulate projects from securities concerns. In parallel, complicated tax implications were crystallizing. Tax advisers reached a consensus that, unlike traditional financing instruments like simple agreements for future equity (SAFEs) or preferred equity, token sales were fully taxable events in the US. Simple agreements for future tokens (SAFTs) — contracts to issue future tokens — faced little better tax treatment, with the taxable event merely deferred until the tokens were released. This meant that a token sale by a US company would generate a massive tax liability. Related: Trade war puts Bitcoin’s status as safe-haven asset in doubt Projects tried in good faith to adhere to these guidelines. Lawyers extracted principles and advised clients to follow them. Some bit the bullet and paid the tax rather than contriving to create a foreign presence for a US project. All this chugged along for a few years. The SEC brought some major enforcement actions, like its moves against Ripple and Telegram, and shut down other projects, like Diem. But many founders still believed they could operate legally in the US if they stuck to the script. Then, events conspired to knock this uneasy equilibrium out of balance. SEC Chair Gary Gensler entered the scene in 2021, Sam Bankman-Fried blew up FTX in 2022, and an unheralded opinion from Judge Paul Barbadoro came out of the sleepy US District Court for the District of New Hampshire in a case called SEC v. LBRY. The LBRY case is a small one, affecting what is, by all accounts, a minor crypto project, but the application of law that came out of it had a dramatic effect on the practice of cryptocurrency law and, by extension, the avenues open to founders. Judge Barbadoro conceded that the token may have consumptive uses but held that “nothing in the case law suggests that a token with both consumptive and speculative uses cannot be sold as an investment contract.” He went on to say that he could not “reject the SEC’s contention that LBRY offered [the token] as a security simply because some [token] purchases were made with consumptive intent.” Because of the “economic realities,” Barbadoro held that it did not matter if some “may have acquired LBC in part for consumptive purposes.” This was devastating. The holding in LBRY is, essentially, that the factors proposed in the SEC framework largely do not matter in actual securities disputes. In LBRY, Judge Barbadoro found that the consumptive uses may be present, but the purchasers’ expectation of profit predominated. And this, it turned out, meant that virtually any token offering might be considered a security. It meant that any evidence that a token was marketed as offering potential profit could be used against you. Even the supposition that it seemed likely that people bought it to profit could be fatal. This had a chilling effect. The LBRY case and related case law destabilized the cryptocurrency project landscape. Instead of a potential framework to work within, there remained just a single vestige of hope to operate legally in the US: Move offshore and decentralize. Even the SEC admitted that Bitcoin and ETH were not securities because they were decentralized. Rather than having any promoter who could be responsible for their sale, they were the products of diffuse networks, attributable to no one. Projects in 2022 and 2023 were left with little option but to attempt to decentralize. Related: Ripple celebrates SEC’s dropped appeal, but crypto rules still not set Inevitably, the operations would begin in the United States. A few developers would create a project in a small apartment. As they found success, they wanted to fundraise — and in crypto, when you fundraise, investors demand tokens. But it’s illegal to sell tokens in the US. So, their VC or lawyer would advise them to establish a foundation in a more favorable jurisdiction, such as the Cayman Islands, Zug in Switzerland, or Panama. That foundation could be set up to “wrap” a decentralized autonomous organization (DAO), which would have governance mechanisms tied to tokens. Through that entity or another offshore entity, they would either sell tokens under a Regulation S exemption from US securities law or simply give them away in an airdrop. In this way, projects hoped they could develop liquid markets and a sizable market cap, eventually achieving the “decentralization” that might allow them to operate legally as an entity in the US again. Several crypto exchanges were incorporated in friendlier jurisdictions in 2023. Source: CoinGecko These offshore structures didn’t just provide a compliance function — they also offered tax advantages. Because foundations have no owners, they aren’t subject to the “controlled foreign corporation” rules, under which foreign corporations get indirectly taxed in the US through their US shareholders. Well-advised foundations also ensured they engaged in no US business activities, preserving their “offshore” status. Presto: They became amazing tax vehicles, unburdened by direct US taxation because they operate exclusively offshore and are shielded from indirect US taxation because they are ownerless. Even better, this arrangement often gave them a veneer of legitimacy, making it difficult for regulators to pin down a single controlling party. After the formation, the US enterprise would become a rump “labs” or “development” company that earned income through licensing software and IP to these new offshore entities — waiting for the day when everything would be different, checking the mail for Wells notices, and feeling a bit jumpy. So, it wasn’t just regulation that drove crypto offshore — it was hope. A thousand projects wanted to find a way to operate legally in the United States, and offshore decentralization was the only path. Now, that may change. With President Donald Trump in office, the hallways of 100 F Street in Washington, DC may just be thawing. SEC Commissioner Hester Peirce has taken the mantle and is leading the SEC’s Crypto Task Force. In recent weeks, Peirce has expressed interest in offering prospective and retroactive relief for token issuers and creating a regulatory third way where token launches are treated as “non-securities” through the SEC’s Section 28 exemptive authority. At the same time, evolutions in law are beginning to open the door for onshore operations. David Kerr of Cowrie LLP and Miles Jennings of a16z have pioneered a new corporate form, the decentralized unincorporated nonprofit association (DUNA), that may allow autonomous organizations to function as legal entities in US states like Wyoming. Eric Trump has proposed favorable tax treatments for cryptocurrency tokens, which, though it might be a stretch, could offer a massive draw to bring assets back onshore. And without waiting on any official shifts in regulation, tax attorneys have come up with more efficient fundraising approaches, such as token warrants, to help projects navigate the existing system. As a16z recently put it in a meeting with Commissioner Peirce’s Crypto Task Force, “If the SEC were to provide guidance on distributions, it would stem the tide of [tokens] only being issued to non-U.S. persons — a trend that is effectively offshoring ownership of blockchain technologies developed in the U.S.” Maybe this time, they’ll listen. Magazine: Memecoins are ded — But Solana ‘100x better’ despite revenue plunge Stablecoin issuer Tether is reportedly in talks with a Big Four accounting firm to audit its assets reserves and verify that its USDT (USDT) stablecoin is backed at a 1:1 ratio. Tether CEO Paolo Ardoino reportedly said the audit process would be more straightforward under pro-crypto US President Donald Trump. It comes after rising industry concerns over a potential FTX-style liquidity crisis for Tether due to its lack of third-party audits. “If the President of the United States says this is top priority for the US, Big Four auditing firms will have to listen, so we are very happy with that,” Ardoino told Reuters on March 21. “It’s our top priority,” said Ardoino. It was reported that Tether is currently subject to quarterly reports but not a full independent annual audit, which is much more extensive and provides more assurance to investors and regulators. However, Ardoino did not specify which of the Big Four firms — PricewaterhouseCoopers (PwC), Ernst & Young (EY), Deloitte, or KPMG — he plans to engage. Tether recorded a profit of $13.7 billion in 2024. Source: Paolo Ardoino Tether’s USDT maintains its stable value by claiming to be pegged to the US dollar at a 1:1 ratio. This means each USDT token is backed by reserves equivalent to its circulating supply. These reserves include traditional currency, cash equivalents and other assets. Earlier this month, Tether hired Simon McWilliams as chief financial officer in preparation for a full financial audit. In September 2024, Cyber Capital founder Justin Bons was among those in the industry who voiced concerns about Tether’s lack of transparency. “[Tether is] one of the biggest existential threats to crypto. As we have to trust they hold $118B in collateral without proof! Even after the CFTC fined Tether for lying about their reserves in 2021,” Bons said. Related: Tether freezes $27M USDT on sanctioned Russian exchange Garantex Around the same time, Consumers’ Research, a consumer protection group, published a report criticizing Tether for its lack of transparency surrounding its US dollar reserves. Just three years prior, in 2021, the United States Commodities and Futures Trading Commission (CFTC) fined Tether a $41 million civil monetary penalty for lying about USDT being fully backed by reserves. Meanwhile, more recently, Tether has voiced disappointment over new European regulations that have forced exchanges like Crypto.com to delist USDT and nine other tokens to comply with MiCA. “It is disappointing to see the rushed actions brought on by statements which do little to clarify the basis for such moves,” a spokesperson for Tether told Cointelegraph. Cointelegraph reached out to Tether but did not receive a response by time of publication. Magazine: Dummies guide to native rollups: L2s as secure as Ethereum itself John Reed Stark, the former director of the Office of Internet Enforcement at the United States Securities and Exchange Commission (SEC), pushed back against the idea of regulatory reform at the first SEC crypto roundtable. The former regulator said the Securities Act of 1933 and 1934 should not be changed to accommodate digital assets and urged that digital assets do not escape the definition of securities under the current laws. The first-ever SEC crypto roundtable. Source: SEC “The people buying crypto are not collectors. We all know that they are investors, and the mission of the SEC is to protect investors,” Stark said. The former official added: “The volume of case law has developed so quickly because of all these crypto firms. They went for this sort of delay, delay, delay, idea, and they hired the best law firms in the world, and these law firms all fought the SEC with incredible briefs.” “I have read every single one of them. And they lost just about, I would argue, every single time,” he continued. Stark concluded that he saw no innovation in digital assets or cryptocurrencies compared to previous online revolutions, such as the debut of the iPhone. John Reed Stark, pictured on the far right, arguing against comprehensive regulatory reform. Source: SEC Related: SEC’s deadline extension is a ‘fork’ in case against Coinbase — John Reed Stark Stark has been one of the most vocal opponents of cryptocurrencies and the digital asset industry, often criticizing the industry for a lack of transparency and accountability. In February 2024, the former SEC official characterized a sponsorship deal between the Dallas Mavericks — a National Basketball Association (NBA) team — and crypto firm Voyager as an agreement with a “heroin manufacturing firm.” Stark later said that the government agency’s regulation by enforcement under former chairman Gary Gensler was warranted and added that cryptocurrency must conform to existing laws rather than the law evolving to embrace the future of money. Stark’s anti-crypto stance has been criticized by industry executives and investors as unhinged. In June 2023, notable investor Mark Cuban called out Reed’s views as “crypto derangement syndrome.” Magazine: SEC’s U-turn on crypto leaves key questions unanswered Arthur Hayes, Murad’s Prediction For Meme Coins, AI & DeFi Coins For 2025 Expert Sees Bitcoin Dipping To $50K While Bullish Signs Persist Aptos Leverages Chainlink To Enhance Scalability and Data Access Bitcoin Could Rally to $80,000 on the Eve of US Elections Sonic Now ‘Golden Standard’ of Layer-2s After Scaling Transactions to 16,000+ per Second, Says Andre Cronje Institutional Investors Go All In on Crypto as 57% Plan to Boost Allocations as Bull Run Heats Up, Sygnum Survey Reveals Crypto’s Big Trump Gamble Is Risky Ripple-SEC Case Ends, But These 3 Rivals Could Jump 500x
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Crypto firms tried to comply in the US
How SEC v. LBRY muddied waters
Regulation and hope drove firms offshore
A slow turning
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Tether to produce first full audit after scrutiny
Industry concerns over Tether’s lack of audits
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John Reed Stark: one of crypto’s staunchest critics
Source link The SEC Resets Its Crypto Relationship
Will new US SEC rules bring crypto companies onshore?
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