Explore the unfolding SEC vs. Ripple saga, delving into legal intricacies, XRP’s future, and the evolving crypto regulatory landscape, unveiling crucial insights.
The ongoing legal battle between the US Securities and Exchange Commission (SEC) and Ripple Labs has been making waves in the cryptocurrency community. However, Ripple (defendants) have secured a partial victory over the nature of its native token, XRP, this lawsuit still remains the most crucial battle for the digital assets industry.
What’s the argument in XRP Lawsuit?
The SEC’s case filed back in December 2020 alleges that Ripple conducted an unregistered securities sale of XRP coins. This central allegation forms the basis of the SEC’s claims against Ripple.
Ripple has stated its intention to fight the ongoing lawsuit with the SEC. This indicates that Ripple is prepared to vigorously defend itself against the SEC’s accusations.
According to the complaint filed by the SEC, Ripple raised funds by selling XRP tokens in unregistered security offerings to investors in the United States and later worldwide. Ripple Labs was accusing Ripple of unlawfully raising over $1.3 billion through the sale of XRP without proper registration
However, the top financial watchdog dropped claims against two Ripple Labs executives in its lawsuit against the company. This development shifted the focus solely onto Ripple itself.
Recently, the SEC scheduled a critical meeting and confer session on November 9 in the ongoing XRP lawsuit. This meeting could potentially have significant implications for the future course of the litigation.
Recent key events in the Ripple Case
U.S. District Judge Analisa Torres denied the commission’s interlocutory appeal request. The SEC acknowledged defeat on the remaining claims against the Ripple executives. This marked a significant setback for the top watchdog.
In July, Judge Analisa Torres granted Ripple a partial win in the case, finding that sales of XRP on public exchanges were not securities offerings. This favorable ruling provided some relief for Ripple, although the case is far from over. Experts suggest a final judgment in 2024.
A federal judge recently refused to let the commission appeal her decision involving Ripple Labs. This decision further limited the SEC’s options to challenge the favorable rulings received by the defendants.
Why does the Howey Test play a critical role in the Crypto Space?
Much talked about these days, the Howey Test established in a 1946 U.S. Supreme Court case plays a pivotal in differentiating investment contracts. The argument arose from a case involving citrus grove sales, the apex court determined that Howey’s leaseback setups were indeed investment contracts. This established crucial criteria for identifying securities.
In the case of cryptocurrencies, the main argument revolves around their classification as securities. It should be noted that there are multiple elements in digital assets taken into consideration while conducting the test. This involves the investment of money, common enterprise, and profit expectations linked to founders’ and developers’ efforts. At this point, the Howey Test plays a crucial role in providing implications for the regulatory categorization of crypto assets.
SEC’s enforcement under Gary Gensler’s regime
The US SEC has taken multiple regulatory actions towards crypto-linked businesses. It sued the country’s biggest crypto exchange Coinbase, Inc. for operating a trading platform as an unregistered national securities exchange, broker, and clearing agency. Additionally, Coinbase was charged for failing to register the offer and sale of its crypto asset staking-as-a-service program.
As per the federal securities laws, companies are required to register with the SEC or qualify for an exemption before offering or selling securities. It should be noted that the commission has brought more than 80 enforcement actions related to fraudulent and unregistered crypto assets since 2017. However, this depicts 2 pictures of the US SEC’s. First, its commitment to enforcing federal securities laws in the context of cryptocurrencies. Second, the approach to expand its jurisdiction.
The SEC has mentioned that Initial Coin Offerings (ICOs) may be considered securities offerings and fall under its jurisdiction for enforcing federal securities laws. This order directly indicates that the commission has authority over certain ICOs and can take regulatory actions when necessary.
What’s next in Ripple Vs SEC?
In conclusion, the US SEC vs Ripple case unfolds with twists and turns. The XRP lawsuit is marked by the SEC’s defeats on some claims and Ripple’s partial victories. However, the legal battle between both parties still continues. However, the commission has let go of accusations against two Ripple Labs executives, including CEO Brad Garlinghouse and co-founder Chris Larsen in the lawsuit. The watchdog withdrew claims that the executives facilitated the sale of XRP.