- The US SEC has taken a stand on Judge Torres's ruling, calling the determination of XRP not being a security as being wrong.
- According to the commission, such a determination invalidates the Howey test, a ten-year-old formula to distinguish between securities and commodities.
- Recently SEC Chair cited disappointment in the Court's decision to deem XRP a non-security.
The United States Securities and Exchange Commission (SEC) has finally taken a stand, revealing its position about the partial victory Ripple Labs and the XRP community took home when Judge Analisa Torres the token security only when sold to institutional investors. Demonstrating their contradiction with the Court's determination, the commission says, "The decision does not square with existing security laws."
Also Read: Bitcoin Weekly Forecast: Could spot ETF trigger BTC rally to $50,000?
SEC contradicts Judge Analisa Torres' ruling
The US SEC has challenged the Court's recent decision when the Ripple camp claimed a partial victory against the commission. Based on Judge Annalisa's ruling on July 13, XRP isn't a security provided its sale was to retail investors on exchanges. Otherwise, selling it to institutional investors made it a security.
The news comes as the commission analyzed the SEC vs. Terraform Labs/Do Kwon case after the defendants' legal representatives leveraged XRP's victory to dismiss its own case against the financial regulator. Citing Terre lawyers on the matter:
[Ripple decision] confirms the legal insufficiency of the SEC's argument that certain tokens were securities.
With reference to the petition by Terra lawyers, the SEC has expressed commitment to appeal Judge Torres' summary judgment.
#XRPCommunity #XRP In the SEC v. Terraform Labs/Do Kwon case, the SEC has filed a pleading discussing Judge Torres’s decision in SEC v. Ripple in which it states that “SEC staff is considering the various available avenues for further review and intends to recommend that the SEC…
— James K. Filan (@FilanLaw) July 21, 2023
The commission's position on the matter is now clearer, days after SEC Chair Gary Gensler said he was disappointed in the ruling during the National Press Club, which marked his first appearance since Judge Torres' summary judgment.
BREAKING: Gary Gensler talks about the Ripple Vs SEC ruling.
— Cryptic Poet (@1CrypticPoet) July 17, 2023
Says the SEC is continuing to asses Judge Torres' opinion. #xrp $xrp #XRPCommunity #crypto #blockchain pic.twitter.com/GGvXSmFKBp
In the latest development, the commission has revealed its position saying:
The SEC respectfully avers that Ripple conflicts with and adds baseless requirements to Howey and its progeny. Respectfully, those portions of Ripple were wrongly decided, and this Court should not follow them.
Noteworthy, the Judge in the Kwon case is Jed Rakoff.
Further, the commission cited the Howey Test, challenging that going by such a ruling would violate a ten-year-old formula used to determine whether an asset is a security or a commodity.
… [The ruling] improperly transforms [the Howey Test] into a subjective standard.
Accordingly, the SEC wants the Court to put away the part of the ruling where XRP is deemed a non-security. Notably, a lot rides on the Ripple Labs vs. SEC case as it sets precedence for many other legal battles in the regulatory realm apart from the Terraform Labs and DO Kwon case.
Also Read: XRP ruling puts cryptocurrencies in nuanced position, industry experts weigh in.
Coinbase exchange has an ongoing tussle with the regulator after it labels more than 10 cryptocurrencies on the US-based exchange's catalog as securities. Based on the allegations, the commission claimed that Coinbase operates as an unregistered security exchange. Noteworthy, this was a day after the agency filed related claims against Binance.
Ripple lawyer John E. Deaton's rebuttal to the SEC
Ripple lawyer John E. Deaton has weighed in, referencing "footnote 13" on Judge Torres' summary judgment. In his opinion, even if the appeal panned out, the SEC would have difficulty (even unable) proving the common enterprise factor between Ripple and XRP holders in the secondary market.
READ FOOTNOTE 13 PEOPLE:
— John E Deaton (@JohnEDeaton1) July 22, 2023
“The Court holds only that a common enterprise existed between Ripple and the Institutional Buyers. The Court does not reach the question of whether the common enterprise extends to encompass "other XP holders." Defendants Garlinghouse and Larsen, the… https://t.co/uQO0q4M6sT pic.twitter.com/VwX4jyChSf
Invalidation of the partial win would harm Ripple price, probably just as much as it helped facilitate a 70% climb in market value, much to the dismay of XRP naysayers. Nevertheless, this is crucial in determining regulation in the cryptosphere, with the fates of many altcoins and the interests of many traders and investors lying on balance.
CRYPTO BREAKING NEWS
— Seabrooke (@Henson_eth) July 22, 2023
Holders of XRP, Solana, ADA, Shiba, Dogecoin, and Others, Be Ready! A Rise Has Never Been So Close!. After Ripple partially declared victory in the lawsuit filed by the U.S. Securities and Exchange Commission (SEC), Bitcoin‘s dominance in the mark...…
FXStreet team will update you on how or whether the commission's appeal will hold in Court.
Also Read: SEC vs. Ripple update: Former SEC official explains why Ripple's win could be overturned
SEC vs Ripple lawsuit FAQs
Is XRP a security?
It depends on the transaction, according to a court ruling released on July 14:
For institutional investors or over-the-counter sales, XRP is a security.
For retail investors who bought the token via programmatic sales on exchanges, on-demand liquidity services and other platforms, XRP is not a security.
How does the ruling affect Ripple in its legal battle against the SEC?
The United States Securities & Exchange Commission (SEC) accused Ripple and its executives of raising more than $1.3 billion through an unregistered asset offering of the XRP token.
While the judge ruled that programmatic sales aren’t considered securities, sales of XRP tokens to institutional investors are indeed investment contracts. In this last case, Ripple did breach the US securities law and will need to keep litigating over the around $729 million it received under written contracts.
What are the implications of the ruling for the overall crypto industry?
The ruling offers a partial win for both Ripple and the SEC, depending on what one looks at.
Ripple gets a big win over the fact that programmatic sales aren’t considered securities, and this could bode well for the broader crypto sector as most of the assets eyed by the SEC’s crackdown are handled by decentralized entities that sold their tokens mostly to retail investors via exchange platforms, experts say.
Still, the ruling doesn’t help much to answer the key question of what makes a digital asset a security, so it isn’t clear yet if this lawsuit will set precedent for other open cases that affect dozens of digital assets. Topics such as which is the right degree of decentralization to avoid the “security” label or where to draw the line between institutional and programmatic sales are likely to persist.
Is the SEC stance toward crypto assets likely to change after the ruling?
The SEC has stepped up its enforcement actions toward the blockchain and digital assets industry, filing charges against platforms such as Coinbase or Binance for allegedly violating the US Securities law. The SEC claims that the majority of crypto assets are securities and thus subject to strict regulation.
While defendants can use parts of Ripple’s ruling in their favor, the SEC can also find reasons in it to keep its current strategy of regulation by enforcement.
Can the court ruling be overturned?
The court decision is a partial summary judgment. The ruling can be appealed once a final judgment is issued or if the judge allows it before then. The case is in a pretrial phase, in which both Ripple and the SEC still have the chance to settle.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Is Altcoin Season here as Bitcoin reaches a new all-time high?
Bitcoin reaches a new all-time high of $98,384 on Thursday, with altcoins following the suit. Reports highlight that the recent surge in altcoins was fueled by the victory of crypto-friendly candidate Donal Trump in the US presidential election.
Shanghai court confirms legal recognition of crypto ownership
A Shanghai court has confirmed that owning digital assets, including Bitcoin, is legal under Chinese law. Judge Sun Jie of the Shanghai Songjiang People’s Court shared this opinion through the WeChat account of the Shanghai High People’s Court.
BTC hits an all-time high above $97,850, inches away from the $100K mark
Bitcoin hit a new all-time high of $97,852 on Thursday, and the technical outlook suggests a possible continuation of the rally to $100,000. BTC futures have surged past the $100,000 price mark on Deribit, and Lookonchain data shows whales are accumulating.
Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange
Shiba Inu trades slightly higher, around $0.000024, on Thursday after declining more than 5% the previous week. SHIB’s on-chain metrics project a bullish outlook as holders accumulate recent dips, and dormant wallets are on the move, all pointing to a recovery in the cards.
Bitcoin: New high of $100K or correction to $78K?
Bitcoin surged to a new all-time high of $93,265 in the first half of the week, followed by a slight decline in the latter half. Reports highlight that Bitcoin’s current level is still not overvalued and could target levels above $100,000 in the coming weeks.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.