Like the Ripple lawsuit against SEC, the entire crypto industry could affect: the opinion of a lawyer
Like the Ripple lawsuit against SEC, the entire crypto industry could affect: the opinion of a lawyer
Since the US stock exchange supervision SEC (Securities and Exchange Commission) starts a comprehensive offensive against cryptocurrencies this year, a ongoing lawsuit against one of the first industry goals of the authority-Ripple-is still as widespread as ever.
In view of the latest developments, many parties involved in the case believe that the court's decision could be imminent. How could the result of the ripple work against the SEC on the cryptom market and the regulatory landscape as a whole?let us dive.
recap: ripple against sec
In December 2020, the SEC accusation Ripple and its two top executives-CEO Brad Garlinghouse and former CEO Chris Larsen-brought up with the implementation of an unregistered securities offer in the form of XRP worth 1.3 billion US dollars from 2013.
The lawsuit led to a drop in price of XRP at the time and prompted many crypto exchanges to remove the asset in order to continue to meet the federal securities laws.
However,ripple did not give in. According to Garlinghouse, the company spent around $ 200 million to defend itself against the allegations of the SEC. The company's core argument is that XRP itself is not a securities or investment contract, but a digital currency that is used to facilitate cross-border payments.
who is right?
So far, the US Congress has not passed any law that clarifies how crypto-assets can be classified by law-be it as securities or as goods.
The most important market regulatory authorities in the country - the SEC and Commodities and Futures Trading Commission (CFTC) - are disagreed on this question, with the former apparently convinced that all cryptos are besides Bitcoin securities.
Sec chairman Gary Gensler is covered when he is asked to publicly discuss which specific cryptocurrencies are securities. Instead, he often refers the industry to the Howey test-a decade-old legal standard for determining whether financial assets are considered investment contracts and thus as securities in accordance with the Securities Act from 1933.
The existence of the Howey test consists of four parts:
1. A financial investment ...
2. In a joint company…
3. With the expectation of a win ...
4. Are derived from the efforts of others.
Industry leaders often question the interpretation of the Howey test by the SEC when applied to digital assets. For example coinbase argues that StableCoins such as the Busd outlined by Paxos (from This month claimed that he was a security) was not investments because their value over time remains "stable".
What do lawyers think about XRP?
John Deaton-founder of Crypto Law.us-is a lawyer who represents over 75,000 XRP owners in the United States against SEC lawsuit. He is decided against the position of the SEC and claims that XRP is not a security and that Gensler should be released from his position.
If you take all laws into account, the Sec has nothing that could support its theory, that sales are also securities on the secondary market. Some may argue that the SEC has the right to pursue new theories that are not supported by the law. I do not agree.
- John E. Deaton (@Johnedeaton1) 19. June 2023
also Sandy Seth-a patent anchor with 25 years of experience-expressed her skepticism over the case of the SEC in a Twitter thread on Monday and argued that XRP did not meet all the requirements of an investment contract under Howey. Although he is not a securities lawyer by profession, Seth's analysis was received positively great praise from Deaton as "good or better than all mine or that of someone else".
Seth spoke to Kryptoctok potato this week about his case against the SEC and what effects the lawsuit has on the entire industry.
"The most fundamental prerequisite [of]" A security is an instrument that proves a financial participation in a joint company, as was the case with howey contracts, "he said. In contrast, the SEC "wrongly" tried to abolish this requirement.
his claims agree with those of Deaton, who often did it from XRP as a company does not necessarily depend on the profits or losses of XRP on the market.
Seth said he hoped that the SEC will not be "confused" by the Howey interpretation of the SEC, and find that none of the contracts underneath Ripple sold XRP are securities because they "do not convey any participation in a joint company".
The Hinman emails
Another of Rippleine of the most common arguments is that the crypto industry has received incorrect and contradictory guidelines for the classification of digital assets from the SEC. As an example, they call a speech by the former commissioner William Hinman from 2018, in which he describes, among other things, how cryptos that were once were, could possibly become securities.
At the beginning of this month, the SEC was forced to reveal internal messages about the speech. The emails showed that Hinman published the speech, although he had received several warnings from his colleagues in the authority that the readers could confuse readers about the characteristics that make up a asset.
While Seth presented evidence of possible corruption at the SEC, he said that these emails are probably only a "diversion maneuver".
"Fair notice defense is * not * connected to it (if the court decides how it should be that neither XRP itself nor the ripple" the contracts under which it was sold were investment contracts, "he said.
What does that mean for crypto?
How many in the crypto industry believes Seth that a decision in Rippledie favor of the US citizen can "make it clear in one fell swoop" that the Sec has no far-reaching authority about the crypto industry.
This would effectively protect crypto companies from future enforcement measures by the authority until the congress passes clarifying legislation. Until then, another authority - like the CFTC - could take the lead.
The SEC sued the crypto exchanges binance and coinbase this month and claimed that it was securities in over a dozen on their platforms. Many of these coins - including Cardano (ADA) and Solana (Sol) - were sold and behaved similar to XRP and suffered similar losses like XRP.
Seth is himself a crypto investor who spent months to conclude in the case after reading the summarizing judgment of the Sec.
"The SEC terrorized the crypto industry through fake enforcement measures," he said. "The SEC has harmed crypto investors and she also knew that it was harmful to investors when it brought these complaints."
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