Ripple vs. SEC case the Summary of Judgement has been filed. CFTC Commissioner meets with CEO Brad Garlinghouse.
The United States Securities and Exchange Commission (SEC) and Ripple Labs have both called for a federal judge to make an immediate ruling on whether Ripple’s XRP sales violated U.S. securities laws. In separate motions filed on Saturday by Ripple and the SEC, both have called for a summary judgment in the U.S. District Court Southern District of New York. Summary judgments are submitted to the courts when a party involved believes there’s enough evidence at hand to make a ruling without the need to proceed to trial.
Both parties have called on Judge Analisa Torres to make an immediate ruling as to whether Ripple’s XRP sales violated U.S. securities laws. Ripple has argued that the SEC has run out of answers to prove XRP sales constituted an “investment contract,” while the SEC has held strong on its beliefs that it does. Ripple CEO Brad Garlinghouse, in a Twitter post on Saturday, said the filings made it clear that the SEC “isn’t interested in applying the law.” “They want to remake it all in an impermissible effort to expand their jurisdiction far beyond the authority granted to them by Congress,” he said.
Meanwhile, Ripple general counsel Stuart Alderoty noted that “after two years of litigation,” the SEC is “unable to identify any contract for investment” and “cannot satisfy a single prong of the Supreme Court Howey test.” In its motion for summary judgment, Ripple claimed that the SEC’s case “boils down to an impermissibly open-ended assertion of jurisdiction over any transfer of an asset.” The motion also argued that the SEC cannot establish that XRP tokenholders could not “reasonably expect profits” based on Ripple’s efforts as there were no contract obligations between Ripple and XRP tokenholders.
On the other hand, the SEC’s own motion for summary judgment argued that there can be an “investment contract” without a contract, any rights granted to the purchaser, and no obligations to the issuer. But, Ripple argued in its motion, “that is not and should not be the law, because without these essential features there is nothing to which the Howey test can sensibly be applied.” Ripple instead pointed to profits coming from “market forces of supply and demand,” something that the SEC “conceded,” according to the Ripple motion. The significance of this admission was highlighted by U.S. Attorney Jeremy Hogan in a Saturday post on Twitter, stating that “these concessions are perfect for a summary judgment.” If the court executes the summary judgment, the court ruling will have a profound impact on determining which cryptocurrencies constitute a security under U.S. securities laws.
Caroline D. Pham, an American attorney serving as one of the five commissioners at the United States Commodity Futures Trading Commission (CFTC), met with Ripple CEO Brad Garlinghouse. The meeting cheered XRP fans and raised questions about the prospect of the token being treated as a commodity and falling under the supervision of the CFTC. According to a Sept. 19 tweet by CFTC Commissioner Caroline Pham, visiting Ripple Labs offices in San Francisco was part of her “learning tour” involving the crypto space.
Brad Garlinghouse later noted that the meeting with the commissioner was about “public-private engagement”, possibly referring to a private company like Ripple Labs engaging with regulators in the U.S. Pham’s meeting with the Ripple chief had many observers comparing the CFTC’s approach to engaging with crypto projects with that of the Securities and Exchange Commission (SEC). It’s worth pointing out that the SEC has been heavily criticized for its ambiguous approach. CFTC commissioner Pham has also previously slammed the agency for indulging in “regulation by enforcement.”
Others on social media suggested the timing of the commissioner’s visit is no coincidence. They even speculated that XRP could come under the CFTC’s purview, which means the agency would become the token’s sole regulator. SEC chair Gary Gensler has continually restated his belief that most crypto tokens have the hallmarks of securities. In July, the SEC announced that it was lodging suits against nine ICO-era crypto projects for selling noncompliant securities; the regulator is also reportedly probing leading U.S. cryptocurrency exchanges, including Coinbase and Binance, for listing these tokens.
The SEC and Ripple recently filed motions for summary judgment in the ongoing lawsuit over whether XRP sales broke securities laws. The two parties want District Judge Analisa Torres to give an immediate verdict without pushing the case forward to a trial. Ripple’s Garlinghouse remarked after the filings that the SEC “isn’t interested in applying the law”. He believes the agency is hell-bent on remaking it to “expand their jurisdiction far beyond the authority granted to them by Congress.” Ripple has been locked in a court case with the SEC since December 2020, trying to establish the status of XRP. Whether XRP is soon recognized as a commodity by the U.S. courts remains to be seen.
