What happened to Ripple and SEC?

Ripple Labs is in the third calendar year of a court case with the US Securities and Exchange Commission (SEC) that could set a precedent for the whole cryptocurrency industry. Ripple’s Chief Legal Officer, Stuart Alderoty, is confident that the company will be successful against the SEC’s claim that its XRP cryptocurrency is a security. He noted that the SEC has lost 4 of its last 5 cases in the Supreme Court. Ripple CEO Brad Garlinghouse is optimistic that the case will be resolved in 2023, possibly in the first half of the year.

Ripple CEO Brad Garlinghouse has said that the company would love to settle its ongoing lawsuit with the US Securities and Exchange Commission (SEC), but that it requires the SEC to make it clear that XRP is not a security. The lawsuit, which hangs on whether Ripple’s XRP token is an unlicensed security, is expected to be resolved in the “single digit months”, with the final ruling expected at some point this year. There was speculation in December 2022 that the case could have been settled that month, but this ended up being mere speculation. Ripple is hoping that the SEC will make it clear that XRP is not a security, so that the company can settle the lawsuit and move forward.

Ripple Labs, the company behind the XRP cryptocurrency, and the SEC have until 30 November 2022 to submit their reply in support of their summary judgment motions. The SEC has been accused of acting outside of its legal limits, and Ripple was handed a small win when the judge ordered the SEC to hand over the “Hinman documents”. However, the SEC has applied to prevent the documents from being made public in the XRP lawsuit. The parties have until 30 November 2022 to submit their reply in support of their summary judgment motions, and the outcome of the case could have a major impact on the cryptocurrency industry.

The Ripple/SEC lawsuit has been a source of confusion and speculation since it began in December 2020. On 14 November 2022, Fox Business reported that a settlement had been reached, but this was later denied by a Ripple spokesperson. In response, 16 organisations have submitted amicus curiae briefs in support of Ripple, including Coinbase and crypto advocacy groups such as the Chamber of Digital Commerce and the Blockchain Association. XRP rallied in September 2022 after the first glimpse of the case’s end, but a subsequent ruling on the relevant LBRY case sent its price spiralling down. The outcome of the Ripple/SEC lawsuit is still uncertain, but the crypto community is watching closely.

Ripple is a cryptocurrency network that aims to bring fast, low-cost payments to financial institutions. It is powered by the XRP native cryptocurrency, which was initially launched in 2013 to raise funds for the company. In December 2020, the SEC sued Ripple Labs, claiming it had raised $1.3bn by selling XRP through unregistered security transactions. Ripple Labs’ CEO Brad Garlinghouse and chair Chris Larsen argued that the sales were legal, based on the Howey Test, which determines whether an asset is a security. Ripple has not denied the sale of XRP, but argued that it does not meet the Howey Test criteria, specifically the first rule which requires an investment contract.

Brad Garlinghouse, CEO of Ripple, has stated that Ripple does not have a contract with anyone, and that there is no written, oral, or implicit contract. However, the SEC has argued that XRP meets the “investment of money” criterion of the Howey Test, which could potentially label it a security. Ripple’s General Counsel, Stuart Alderoty, has clarified that the SEC has not labeled XRP a security, and does not have the power to do so. The SEC’s summary judgment motion is still pending, and the outcome of the case will determine whether XRP is classified as a security or not.

The US District Court for the Southern District of New York is currently hearing a case between the SEC and Ripple Labs. On 17 September 2022, both parties filed motions for summary judgment. On 21 September 2022, the court granted the request for the Chamber of Digital Commerce, an American advocacy group for blockchain technology, to file an amicus curiae brief in support of Ripple’s argument. The SEC took no position on the brief, but said it may request more time if more amicus briefs were granted. Ripple’s defence team argued that this was an attempt to delay resolution of the case. The court will now consider the motions for summary judgment and the amicus brief before making a decision.

Ripple CEO Brad Garlinghouse and General Counsel Stuart Alderoty have both spoken out against the US Securities and Exchange Commission’s (SEC) lawsuit against Ripple. On 21 September, a motion was granted that gave deadlines for motions to seal. On Fox Business and CNBC, Garlinghouse suggested it was unlikely the case would go to trial and that the SEC was overreaching its authority. Alderoty commented on the need for regulation, saying that the industry needs clarity so that crypto innovation can flourish in the United States. Ripple is fighting the case to ensure that the industry can get the regulatory clarity it needs.

The SEC and Ripple Labs have submitted motions of opposition to the counterparty’s summary judgment filings in October 2022, restating their positions on whether XRP should be classified as a security. On 5 December, Judge Torres made the summary judgments public, and granted an application by both parties to set a deadline of 4 January 2023 for non-parties to ask for court materials to be sealed. The SEC then requested a time extension to file expert challenges by 13 January 2023, which was approved by the judge. The SEC also applied to redact the names of consulting firms that assisted its expert witnesses, but this was denied. The case is ongoing, with the next deadline for the SEC to file expert challenges set for 13 January 2023.

In September 2022, Judge Torres ordered the SEC to hand over documents from William Hinman, a former SEC director. These documents could be a key piece of evidence for Ripple, as they could reaffirm its position that XRP is not a security. After 18 months and six court orders, Ripple’s legal team received the documents in October. However, in December 2022, the SEC applied to keep the Hinman documents out of the public domain, arguing that the public’s right to access documents that have no relevance to the court’s summary judgment decision is outweighed by the potential harm to the SEC’s mission.

Ripple, a blockchain company, has received support from two companies, TapJets and I-Remit, who have submitted amicus briefs in its favor. However, the SEC has asked the judge to deny these requests, arguing that the letters failed to explain the relevance with the ongoing court case. Ripple has responded by stressing that the briefs provide an important perspective to the court on whether investors expected XRP profits. Judge Torres has approved TapJets’ and I-Remit’s request to submit these briefs, and the documents were made public on 14 October and 12 October respectively. This case will be important in determining whether investors expected XRP profits, and the outcome could have major implications for Ripple and the blockchain industry.

Ripple, a cryptocurrency company, is facing a lawsuit from the US Securities and Exchange Commission (SEC) for allegedly selling unregistered securities. To support its case, Ripple has requested permission to submit amicus briefs from 16 different organisations. The latest to submit a brief was the Coinbase cryptocurrency exchange, which said that Ripple did not have enough notice to comply with asset security laws. The Blockchain Association, a crypto advocacy group, also announced its support for Ripple. In response, the SEC has requested an extension of the time to reply to these briefs, with the new deadline proposed for 30 November 2022. Ripple has consented and revised dates have been adopted.

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Kassidy Florette
Kassidy followed her friends to buy her first Bitcoin in 2015, has been participating in various projects since 2019 as a marketing communication lead. Her knowledge and passion brings her in as a contributor.