The SEC argues that XRP falls directly under the definition of an investment contract between Howey and his descendants. According to the SEC, the buyers of XRP invested in a joint venture because these buyers were entitled to receive returns directly proportional to their share of the token, or alternatively, the buyers` assets were linked to the assets of the developer, in this case Ripple, which has been the largest holder of the token since its inception. The SEC further argues that it is clear that XRP buyers reasonably expected to profit from their purchase, in part because Ripple openly promoted, marketed and took steps to ensure buyers` ability to resell XRP on secondary markets from the outset and touted its efforts to provide and protect the liquidity of XRP markets. inter alia. To this end, the SEC argues that XRP buyers expected their profits to result from Ripple`s efforts. Ripple has repeatedly promised to develop a « utility » and increase the « public service » or « demand » for XRP, announcing its previous efforts and future intentions to increase XRP`s liquidity. If the court accepts these arguments, the SEC has determined that XRP is an investment contract and is therefore subject to the provisions of federal securities laws, including registration as a security. In response, Ripple pointed out that the briefs provide the court with an important perspective on whether investors expect XRP profits. Tomio Geron (@tomiogeron) is a San Francisco-based journalist who covers fintech. Previously, he was a journalist and editor at the Wall Street Journal, covering venture capital and startups. Prior to that, he worked as a copywriter at Forbes, where he covered social media and venture capital, and also edited Midas` list of top tech investors. He has also worked for newspapers covering crime, courts, health and other issues. It can be performed in email@example.com or firstname.lastname@example.org.
Supporters believe that court rulings have so far been in Ripple`s favor. Lawyer Jeremy Hogan, an XRP2 lawyer and US legal advisor, expects the case to be resolved soon. Garlinghouse believes the SEC case will be resolved by April 2022. However, the SEC asked the judge to dismiss those requests. The Commission argued that the letters did not explain the relevance of the ongoing court case. The company argues that XRP is not an « investment contract » and is therefore not subject to the authority of the regulator. Allowing the SEC to regulate the token as collateral would open the door to treating other assets — such as cars, diamonds and soybeans — as securities, Ripple said in court documents. What does the future hold? That remains to be seen. SEC v. The Ripple case has a long — and probably chaotic — prosecution process ahead of it, and we`re all watching what`s coming out. XRP rebounded after the summary judgments were filed in response to the first glance at the end of the court case. It also increased after the recent Hinman decision.
Ripple`s legal team received the documents on October 20. Alderoty tweeted: « More than 18 months and 6 court orders later, we finally have the Hinman documents (internal SEC emails and drafts of his infamous 2018 speech). Although they remain confidential for now (at the SEC`s insistence), I can say that it was worth fighting for. « The SEC is asking the court to rewrite the regulations that define its authority, » Ripple said. Nagy noted that while an « SEC victory would be a harbinger of more regulatory action, » Ripple « appears to be playing the long game » and is likely to take the case to appellate courts if necessary. The case has now reached a crucial point, with both sides filing summary judgment motions in mid-September, partially asking the court to decide the most important issue in the case: whether XRP is a security that must be registered under the Securities Act. If the court makes a summary judgment on this issue, it will have effectively decided the case. If Ripple relies on the claim and the court concludes that XRP is not a security, there can be no violation for the sale of unregistered securities.
It would also be the most significant defeat yet in the SEC`s campaign to regulate cryptocurrency. However, if the SEC wins with its request, it will be another win for the regulator, which has repeatedly taken successful action against cryptocurrency issuers. If the court rejects both requests, the case will be heard at a main hearing. The SEC lawsuit, filed today in U.S. District Court in Manhattan, alleges that the defendants violated the registration requirements of the Securities Act of 1933 and seeks injunctive relief, prejudicial interest collection, and civil penalties. However, since the publication of the summary of comments, none of the parties has provided an update of the timetable. The judge`s office, court clerk and SEC were unable to comment on the expected timeline for the case. December 21, 2020: The SEC filed a lawsuit against two Ripple Labs executives and the company itself.
Instead of complying with the SEC`s requirements, Garlinghouse said it was defending itself in the XRP lawsuit. However, Ripple Labs president Chris Larsen and Garlinghouse claimed the sales were legal. Their reasoning was based on the so-called Howey test of a U.S. court case, which determines whether an asset is a security. Despite industry hopes for a decision that will finally end uncertainty, the court`s eventual decision in the Ripple SEC case could add more « ambiguity » to an already confusing and ambiguous space, DeWaal said, citing the contradictory way regulators have approached crypto. On February 23, 2022, the letter was submitted to the court, indicating that the class action would be filed on February 26, 2022. August 2022, but the parties agreed to begin on November 18, 2022 to prepare for factual and legal issues. Debevoise and King & Spalding have collectively handled more than 50 percent of Ripple`s litigation in U.S. federal courts over the past five years, according to data from Bloomberg Law. More than 20 other companies also represented Ripple during this time, including Boies Schiller Flexner; Cooley; K&L; Quinn Emanuel Urquhart & Sullivan Doors; and Skadden, Arps, Slate and Meagher & Flom. In 2010, Alderoty served on an advisory committee convened by the U.S. Chamber of Commerce to review future Supreme Court Justice Elena Kagan`s views on economic issues following her appointment to a seat on the Supreme Court.
A court decision on the competing claims is expected shortly. If Ripple wins, the SEC will have suffered a major defeat, not only because it lost one of the most important cryptocurrency enforcement actions ever taken, but also because it could mean that the court was convinced by Ripple`s « essential ingredients » test of what constitutes an investment contract. The impact of such a decision would likely have profound implications for future SEC litigation. The lawsuit between Ripple Labs and the U.S. Securities and Exchange Commission (SEC), which has been going on since 2020 and will set a precedent for the cryptocurrency industry, could soon come to an end. The SEC and Ripple Labs, the company behind Ripple (XRP), have filed summary motions. June 14, 2021: The court extended the SEC`s deadline for disclosure of its internal crypto trading policies to August 31, 2021. In response, Ripple`s defense team said, « This is another transparent attempt to further delay the resolution of this case, and the court should dismiss it. » Two days after the filings, the court considered and granted the request of the Chamber of Digital Commerce, a U.S. advocate for blockchain technology, to file an amicus curiae brief.
The letter supported Ripple`s argument. Just like the broader crypto market, XRP has declined rapidly since the beginning of the year.