SEC’s Bold Move: The Ripple War Over XRP Heats Up!

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The U.S. Securities and Exchange Commission (SEC) has filed an appeal regarding the court’s decision in the ongoing legal dispute between them and Ripple Labs.

In simpler terms, the Securities and Exchange Commission (SEC) has filed an appeal to contest a decision from July 2023, which partially dismissed charges against Ripple. The SEC aims to convince the appellate court that the XRP tokens sold to ordinary investors were not properly registered as securities.

SEC Files Appeal 

* In a filing made towards the end of Wednesday, the focus of the appeal centers around Ripple’s sales of XRP to individual investors and whether these transactions can be classified as unregistered securities transactions according to federal law.
* The SEC maintains that a lower court erred in its decision that XRP sales to investors did not constitute an unregistered securities offering. They base their argument on the Howey Test, claiming that Ripple’s marketing efforts fostered investor expectations of profit, thereby classifying XRP as an investment contract.
* Furthermore, the SEC disputes the classification of XRP given to employees as compensation and in business deals as non-securities. They assert that exchanges of labor and services for XRP meet the criteria for investing money as outlined by the Howey framework.

Not only those institutional investors who intentionally bought XRP from Ripple, but all XRP investors in general, had a reasonable assumption that their investments could yield profits due to Ripple’s actions aimed at increasing the value of XRP. However, this assumption contradicts the criteria set by Howey’s standard.

Should the appeal be upheld, this case will revert back to the District Court for resolution. As an analyst, I would anticipate that a judge would then determine any appropriate actions against Ripple, and assess whether the company’s top executives may have contributed to violations of securities laws during the sale of XRP to investors.

Ripple’s Response 

In response to the SEC’s appeal regarding X, Brad Garlinghouse, CEO of Ripple, expressed his view that the SEC was repeatedly engaging in the same actions and hoping for a change in outcome.

As a researcher, I find myself often reflecting on the notion that doing the same actions repeatedly while hoping for distinct outcomes is a form of insanity, as Albert Einstein once put it. Indeed, this principle seems to have profoundly influenced the Securities and Exchange Commission (SEC) led by Gary Gensler, as they have shown a clear commitment to breaking the cycle of repetition in their approach to regulation.

Currently, Ripple’s legal team disagrees with the SEC’s stance, arguing that XRP should be considered as a currency rather than a security. Ripple’s Chief Legal Officer, Stuart Alderoty, has dismissed the SEC’s appeal as repetition of previously unsuccessful arguments. He anticipates that the case may lose traction under the new administration.

Just as anticipated, the SEC’s appeal brief presents repetitions of arguments that have previously been disproven. It’s likely that these points will be discarded by the incoming administration. For now, understand this: the SEC’s lawsuit against us is essentially noise. A new era of regulation that encourages innovation is on the horizon, and Ripple is flourishing in preparation for it.

In simpler terms, Jeremy Hogan, a lawyer who supports cryptocurrency, expressed his opinion that the case won’t be decided in favor of the arguments presented, which he felt were weak.

I found it surprising, given the circumstances, that there seemed to be no substantial proof presented by the SEC indicating that ordinary XRP buyers were aware of Ripple or its promises towards them.

Far-Reaching Consequences 

This legal matter might stretch over several months, and its resolution could carry substantial consequences for the cryptocurrency sector. Many consider it a potential indicator of regulatory guidance regarding digital assets categorization. If the verdict is overturned, the SEC may file additional cases of this nature. However, a loss for the regulatory body could weaken its enforcement power significantly. The appeal arises as optimism builds, with Donald Trump set to take office on Monday, and current SEC Chair Gary Gensler resigning on the same day.

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2025-01-16 19:13