Elon Musk Faces SEC Lawsuit for Late Twitter Ownership Disclosure

Musk is not very happy about the lawsuit, and criticized the SEC by calling it a ‘totally broken’ organization. The SEC is also still moving forward with its older enforcement efforts, including its appeal against Ripple over XRP’s status as a security, despite an impending leadership change as Gary Gensler prepares to step down. Meanwhile, the CFTC is considering reviewing Crypto.com’s sports betting futures contracts.

SEC Sues Elon Musk

The US Securities and Exchange Commission (SEC) filed a lawsuit against Elon Musk, alleging that the billionaire did not disclose his beneficial ownership of X in a timely manner. According to the SEC, Musk began buying Twitter shares in early 2022 and surpassed the 5% ownership threshold on March 14. 

However, he did not disclose his stake in the required 10-day period, and instead filed the report 11 days late on April 4 of 2022. The SEC claims that this delay allowed Musk to continue purchasing Twitter shares at artificially low prices, ultimately underpaying by at least $150 million for shares acquired between March 24 and April 4, 2022. On the day of Musk’s disclosure, Twitter’s stock price surged by more than 27%.

The lawsuit was filed in Washington, DC, and it accuses Musk of taking advantage of the delay to buy shares from the public at prices that did not account for his growing ownership stake. The SEC argues that this deprived investors of critical information and allowed Musk to save a lot on his total investment. 

Musk eventually acquired Twitter for $44 billion on April 25, 2022, before taking the platform private and renaming it to X. He also implemented many sweeping changes, including mass layoffs and alterations to its content moderation policies. These changes subjected the platform to increased regulatory scrutiny in regions like Europe and Australia.

In response to the lawsuit, Musk posted on X and criticized the SEC as a “totally broken organization.” He also accused it of prioritizing minor complaints over larger issues. His lawyer, Alex Spiro, described the lawsuit as a “ticky-tack complaint” and believes it is the culmination of the SEC’s alleged harassment of Musk. Spiro stated that Musk did not do anything wrong and suggested the lawsuit was an attempt by the SEC to distract from its inability to pursue more important cases.

The lawsuit was filed just days before SEC Chair Gary Gensler is set to step down with Donald Trump assuming the presidency. Musk is expected to advise the incoming administration on government efficiency, but now faces a jury trial and potential penalties, including disgorgement of profits and a civil fine, if found liable.

SEC Presses Ripple Case Despite Looming Shakeup

The US SEC is also still pressing ahead with its current enforcement cases, despite the imminent leadership change on Jan. 20 when Gary Gensler steps down as chair. Ripple’s chief legal officer, Stuart Alderoty, confirmed in a Jan. 14 post on X that the SEC will not delay filing a brief in its appeal of a judgment against Ripple. 

In August, the blockchain firm was found liable for $125 million in a case where the SEC alleged XRP was used as an unregistered security to raise funds. Alderoty criticized the SEC’s actions as a waste of taxpayer dollars but is still very confident in Ripple’s position on appeal and optimism about working with new leadership.

Ripple CEO Brad Garlinghouse agrees, and expects that the SEC’s enforcement approach might shift after Donald Trump’s inauguration on Jan. 20. One of Trump’s campaign promises was to replace Gensler. The SEC Chair faced widespread criticism from the crypto industry. Trump also indicated that he would nominate former SEC commissioner Paul Atkins as the next chair, pending Senate approval.

The civil case against Ripple was initiated in December of 2020 during Trump’s first term under then-SEC Chair Jay Clayton, and it is now headed to an appellate court. The SEC is appealing a federal judge’s decision that XRP does not necessarily qualify as a security, while Ripple’s appeal will focus on other aspects of the judgment. It is still uncertain whether the SEC’s new leadership will continue pursuing the case against Ripple.

Alderoty donated more than $300,000 to Trump-supporting political action committees (PACs). Additionally, Ripple contributed $45 million to the Fairshake PAC, which spent over $100 million supporting pro-crypto candidates in the 2024 election cycle. Ripple announced an additional $25 million donation to the PAC for the 2026 midterms.

CFTC Considers Review of Crypto.com

The US Commodity Futures Trading Commission (CFTC) is reportedly considering a review of Crypto.com’s futures contracts that allow users to bet on football matches, including the upcoming Super Bowl. According to Bloomberg, the CFTC’s five commissioners are voting on whether to initiate a 90-day review to determine if the contracts violate gaming laws. While the agency cannot immediately stop trading, it could ban the contracts after the Super Bowl on Feb. 9.

Crypto.com operates a US-based derivatives exchange, and notified the CFTC on Dec. 19 of its plans to begin trading the contracts on Dec. 23. However, because of time constraints during the holiday season and concerns about a government shutdown, the CFTC did not review the contracts before their launch. 

The contracts allow users to wager on the outcomes of college football and National Football League games, including the Super Bowl. It has limits of 2,500 contracts per user and a maximum of 250,000 contracts for market makers. Each contract is listed at $100.

The potential probe comes at a time when the CFTC is already grappling with regulating event contracts, which allow betting on various outcomes, from sports to political events. These contracts have gained a lot of traction through decentralized platforms like Polymarket. 

Polymarket is a decentralized prediction market platform that allows users to trade on the outcomes of real-world events. These events could include elections, sports, or other current topics. Because it is built on blockchain technology, it provides a marketplace where people can bet on event outcomes by using cryptocurrency.

The CFTC is also appealing a court decision against Kalshi, a betting market provider, over contracts related to the 2024 US elections. The regulator argues that these offerings fall under gaming laws. A spokesperson for Crypto.com believes that CFTC’s court loss provided enough legal clarity for event contracts.

In response to the potential review, a Crypto.com spokesperson shared their disappointment and also criticized the current CFTC leadership for considering action before the incoming administration could weigh in. The agency’s chair, Rostin Behnam, is set to step down on Jan. 20 when Donald Trump assumes the presidency. Reports suggest that pro-crypto CFTC Commissioner Summer Mersinger is favored to lead the agency, though no official replacement has been announced just yet.