Is the XLM Crypto Next in Line for a Big SEC Lawsuit?


  • Stellar (XLM-USD) could be in trouble with the Securities and Exchange Commission.
  • The SEC has been contacting Grayscale with questions regarding the XLM crypto and its status as a security or a commodity.
  • Given its closeness to Ripple (XRP-USD), the news suggest the SEC could go after Stellar in a similar manner to the former.
XLM crypto - Is the XLM Crypto Next in Line for a Big SEC Lawsuit?

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As the Securities and Exchange Commission continues to trudge along with its research into the crypto market, a grip of companies have fallen victim to probes. The government body is prodding the market for regulatory weaknesses and unsavory mechanics it will seek to address in the coming years as legislators pass related laws. Stellar (XLM-USD) and the XLM crypto are one of the newest projects under the SEC’s magnifying glass.

In two years, the SEC’s small inkling of interest in crypto has snowballed exponentially. Opening its first major legal action against a crypto project in 2020, it now has its fingers in a number of the biggest companies serving the mostly-unregulated industry. The agency has become a true heel to exchanges, DeFi platforms and dapp developers alike.

Over the course of the summer, the SEC opened up several new probes targeting some of the most reputable crypto companies. Most notable are its multiple probes into Coinbase (NASDAQ:COIN); it is investigating whether Coinbase conducted illegal securities offerings, its staking function’s legitimacy and a previous employee’s role in the first-ever crypto insider trading investigation.

These investigations all come years after the first probe by the SEC into the crypto market — one which is still ongoing via lawsuit. In December of 2020, the SEC charged Ripple (XRP-USD) with conducting an illegal security offering by selling its XRP crypto.

The legal battle is coming up on its second birthday. And, it seems no more likely to end than it did when it started; the two bodies have been back and forth with wins and loses. This might be a good thing, too. The suit will certainly set a precedent for the SEC’s future handling of crypto offerings, so taking the time to lay out a robust case is best for investors.

XLM Crypto News: SEC News Implies Trouble for Stellar

All of the SEC’s actions thus far have proven everybody is a potential target for a suit. And Stellar’s XLM crypto could very well be the next project hit as it comes to light that the SEC is taking interest in it.

Of course, it’s worth mentioning Stellar’s relationship to Ripple. The projects are closely-aligned in founding and in purpose, after all. Therefore, the outcome of the Ripple lawsuit could have the most obvious effect on Stellar. The two projects share a co-founder in Jed McCaleb, who left Ripple in 2013 to launch Stellar. At its onset, Stellar even borrowed Ripple’s protocol to settle transactions. Like its peer, the project is meant to facilitate cross-border payments without the red tape of bank-centric wire transfers.

Crypto institutional investor Grayscale is causing concern for the XLM crypto today as it reveals information around an SEC inquiry. The government body apparently contacted Grayscale for information regarding several crypto trusts, one of which holds XLM. It is looking for more insight into Grayscale’s “securities law analysis” of its token holdings.

Previously, Grayscale had remained assertive that XLM and many of its other holdings were not securities. Though, as CoinDesk reports, it is acknowledging for the first time that these tokens may be securities under current laws. While there’s no solid evidence the SEC will pursue Stellar through investigation, it’s a spooky moment for holders. Grayscale’s new change in stance and XLM’s very similar model to Ripple could land it in a similar predicament as XRP.

On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Brenden Rearick is a Financial News Writer for InvestorPlace’s Today’s Market team. He mainly covers digital assets and tech stocks, with a focus on crypto regulation and DeFi.

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