XRP and SEC case: Where are we now
On 22 December 2020, the US Security and Exchange (SEC) filed a lawsuit against Ripple Lab, the company behind the Ripple Network and XRP tokens, and two of its executives. According to the SEC, Ripple executives held an Initial Public Offering (IPO) of XRP, which was unregistered security.
The SEC claims to the XRP case
The SEC took Ripple Lab to court because they claimed XRP tokens are securities. The tokens were classified as securities since they were used to fund Ripple’s platform, which facilitates money transfers for retailers. The sale of the tokens also enriched the platform’s management.
The tokens also satisfied the Howey Test, a test that aids in determining whether an asset is a security. As securities, XRP tokens were supposed to have been registered with the SEC and certain financial information publicly disclosed. Ripple Labs failed to adhere to the SEC securities requirements.
Ripple’s response to the XRP case
Ripple, through its lawyers, claimed that the SEC never warned nor gave fair notice that XRP tokens were securities. The SEC admitted no statement was made that XRP could be classified as securities.
Ripple also claimed the SEC was biased in applying the security concept on XRP tokens. The company pointed out some of the links SEC members have had with other crypto platforms, especially Ethereum.
There is still no proof to Ripple’s claims that the SEC gave Ethereum a pass on securities legislation, saying it operates in a decentralized manner while suing Ripple is suspicious.
The XRP case so far
Ever since the SEC took Ripple to court, the company, through its lawyers has been trying to get the case dismissed.
On May 4th 2022, Ripple, again, filed a motion to dismiss the SEC’s charges. Reason for the case dismissal was the SEC’s failure to state claim against Ripple.
Attached to Ripple’s dismissal motion was a letter from an unidentified third-party. The letter claimed the SEC’s lawsuit against Ripple could have a negative impact on the US financial system.
According to the letter if the court was to conclude that XRP tokens are securities it could stunt the growth of blockchain technology and cryptocurrencies in the United States.
A lose for Ripple would result in the secondary market for XRP tokens ceasing to exist and many US investors who hold them would be left with worthless assets.
In a bid to prove XRP tokens are not securities Ripple asked the SEC to release emails related to a 2018 speech by former SEC director William Hinman in which he argued Ethereum was not a security.
A judge ordered the SEC to release drafts of the speech and related emails but the SEC argued the communications were protected by “attorney-client” privilege. On July 12th the SEC’s appeal for protection from disclosure of William Hinman’s speeches was dismissed.
The SEC has also failed to block XRP holders from aiding in the XRP case. The court dismissed the SEC’s motion to revoke the “friends of the court” status granted to XRP holders.
So far Ripple Labs seems to have the upper hand in the XRP case. The company through its lawyers has further accused the SEC of using unfair tactics to try and prolong the case.
The Ripple lawsuit is one of the most followed cases in the crypto space. The decision of the case is vital to the crypto space as it could be a win or lose for the industry.
So far, Ripple seems to be winning, considering the unfair tactics the SEC is using to prolong the case. The decision of the case might be reached in 2023.
Author: Jay Jackson
Jay Jackson is a crypto trader, researcher and freelance writer. He works closely with people and businesses in the crypto sphere, writing blog posts, guides, press releases, reviews and ebooks.