The latest move by the U.S. Securities and Exchange Commission (SEC) in their ongoing court dispute with Ripple Labs has now shifted the direction of the case.
On January 15th, the Securities and Exchange Commission (SEC) submitted a petition contesting the previous decision made by the district court regarding Ripple’s distribution of XRP to regular investors.
SEC Argues XRP Retail Sales Qualify as Investment Contracts
The Securities and Exchange Commission (SEC) is contesting the decision made by the district court, which classified XRP sales to ordinary investors as non-investment contracts.
The court differentiated between individual shoppers (retail buyers) and large-scale investors (institutional investors), stating that those buying XRP through trading platforms didn’t necessarily anticipate the same level of returns.
The SEC, however, contends that this reasoning is flawed.
In their ruling, the district court mistakenly concluded that regular investors didn’t anticipate the seller of XRP to be Ripple, as they bought it through cryptocurrency trading platforms and were unsure if the vendor was affiliated with Ripple or another party,” the SEC stated.
The SEC’s legal case relies on the principles established by the Howey Test. Introduced in a 1946 Supreme Court ruling, the Howey Test sets out the criteria for identifying an investment contract. In essence, an investment contract is deemed to exist when individuals put their money into a business with the understanding that they will mainly earn profits from the work of others.
The Securgy (SEC) stated that Ripple’s consistent communications across multiple platforms like their website, YouTube, Reddit, and media appearances, clearly showed that both individual and institutional investors believed they would earn profits due to Ripple’s activities.
Additionally, the regulatory body contested the district court’s ruling on Ripple selling XRP in exchange for work or services instead of cash.
Under the Howey Test, the Securities and Exchange Commission proposes that non-monetary payments be considered equivalent to cash investments. Precedents from various courts show that these types of financial agreements meet the “investment of money” prerequisite for an investment contract.
According to the SEC, Ripple ought to have registered its investment contracts with them. Furthermore, they asked the court to overturn the lower court’s decision and rule in favor of the Commission instead. The SEC believes that Ripple’s actions went against securities laws, causing harm to investors.
In response to the SEC’s appeal regarding X, Ripple’s top legal officer, Stuart Alderoty, described the ongoing lawsuit as merely “background noise.
Just as anticipated, the SEC’s appeal brief recycles arguments that have previously been unsuccessful – ones that may not be pursued by the incoming administration. We will provide a formal response when due. In the meantime, understand this: the SEC’s lawsuit is merely a distraction. The dawn of a regulation-friendly era for innovation is approaching, and Ripple continues to prosper according to Alderoty.
Contrary to recent SEC news, the XRP token seems to have defied the odds, experiencing a 7.8% surge during the past 24 hours and currently valued at $3.07. This upward trend suggests that market participants are optimistic about a positive verdict in the ongoing case involving Ripple.
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2025-01-16 17:34