When in December 2020 the SEC filed a lawsuit against Ripple, a leading crypto company that deals with peer-to-peer payments and is also used by many banking institutions, it was dubbed by many as the mother of all lawsuits.
The reason for the lawsuit raised by the SEC against Ripple
The SEC was convinced that by proving that Ripple had made a sale of tokens (which could be equated with securities) it had violated the rules on the sale of financial securities that apply in the United States. The US Securities and Exchange Commission (SEC) accused Ripple Labs CEO Brad Garlinghouse and co-founder Chris Larsen of selling XRP, Ripple’s native token, as if it were an unregistered securities offering. Instead, Ripple seeks to assert that XRP is not a security.
The lawsuit in recent weeks seems to be unhesitatingly agreeing with the crypto company; Sarah Netburn, the judge in charge of the case, has first denied the SEC’s motion for hypocrisy toward some witnesses, and then allowed Ripple’s request that some videos from 2015, in which a former SEC executive spoke precisely about tokens and securities, may be brought to court as documentary evidence, expressing an opinion that is entirely favorable to what Ripple is trying to prove in its lawsuit against the SEC.
The SEC could lose the lawsuit
The SEC thus seems doomed to defeat, not least because the judge in late July also denied further opposition to the presentation as witnesses of 1,700 holders of the XRP token. It now appears that the US Securities and Exchange Authority is now cornered in this protracted litigation, brought at the express behest of its chairman, Gary Gensler, who has always been highly critical of the cryptocurrency world. Gensler is one of the strongest proponents of the need for precise regulation of them to be passed to protect investors and customers.
At this point, the relationship between Gensler and the cryptocurrency world seems to have become almost like a personal war. At the end of June, Gensler defined Bitcoin as a commodity and the other major cryptocurrencies as securities and as such should be regulated.
In Gensler’s mind, the lawsuit against Ripple evidently aimed precisely at proving that all cryptocurrencies were selling tokens in the same way as securities and therefore did not have the proper permissions to do so. But Ripple‘s CEO, Garlinghouse, is now confident that his company, as indeed it seems, will eventually prevail in court, scoring a point in favor for the entire cryptocurrency world
“I’m betting that because the law is on our side. I think the SEC has massively overstepped and is trying to take kind of jurisdictional ownership over something that is… I think they saw this gray area they’re like ‘hey we are going to go in. It’s frustrating it’s taking this long. There’s a lot of companies, I think, that realize how important this case is to the whole industry”,
Garlinghouse said a month ago.