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

A number of businesses have been the target of investigations as the Securities and Exchange Commission continues to plod along with its investigation into the cryptocurrency industry. As lawmakers enact relevant legislation, the government body is probing the industry for regulatory gaps and dubious practices that it will look to remedy in the next years. The SEC is now scrutinizing one of the newest projects, Stellar (XLM-USD) and the XLM cryptocurrency.

The SEC's first nascent interest in cryptocurrencies has grown tremendously over the last two years. It launched its first significant legal action against a cryptocurrency project in 2020 and currently has a hand in some of the largest businesses supporting the mostly unregulated sector. The agency is becoming a real pain in the neck for both exchanges and dapp developers.

The SEC launched numerous additional investigations throughout the course of the summer that focused on some of the most recognized cryptocurrency businesses. Most noteworthy are its several investigations into Coinbase (NASDAQ:COIN); it is looking into the validity of Coinbase's staking feature, whether it made unlawful securities offerings, and the involvement of a former employee in the first-ever crypto insider trading inquiry.

These inquiries all follow the SEC's first inquiry into the cryptocurrency market, which is still active today and is being pursued via litigation. The SEC accused Ripple (XRP-USD) of selling its XRP cryptocurrency in violation of securities laws in December 2020.

The legal dispute is approaching its second anniversary. The two bodies have gone back and forth with victories and losses, and it doesn't seem any more probable that it will stop than it did when it first began. This might also be advantageous. It is in the best interests of investors to take the time to present a strong case since the lawsuit will undoubtedly create a precedent for how the SEC will handle future crypto offers.

Crypto News XLM: SEC News Suggests Stellar Is in Trouble

All of the SEC's actions to far have shown that anybody may become the subject of a lawsuit. And now that it's known that the SEC is showing interest in Stellar's XLM cryptocurrency, it's possible that it may become the next big initiative.

Of course, the connection between Stellar and Ripple is important to note. After all, the initiatives' origins and goals are quite similar. Therefore, the Ripple lawsuit's verdict may have the greatest direct impact on Stellar. Jed McCaleb, who left Ripple in 2013 to start Stellar, is a co-founder of both projects. Stellar even used the Ripple technology to settle transactions at first. Similar to its peer, the initiative aims to reduce the administrative burden of wire transfers that are bank-centric.

Institutional cryptocurrency investor Grayscale is raising doubts about an SEC investigation today, which is bad news for the XLM cryptocurrency. In order to learn more about multiple crypto trusts, including one that contains XLM, the government organization reportedly got in touch with Grayscale. It wants more information on the "securities law study" Grayscale did of its token holdings.

Grayscale has previously maintained its position that several of its other assets, including XLM, were not securities. While conceding for the first time that these tokens could qualify as securities under present rules, as CoinDesk notes. Although there is no concrete indication the SEC will investigate Stellar, it is a scary time for holders. Given its recent position shift and how closely XLM resembles the Ripple model, Grayscale may find itself in a same bind as XRP.