Another Win for XRP in SEC v Ripple Case

Ripple Labs and its co-founders are on a roll as Judge Sarah Netburn provided another win in the lawsuit that many experts say may determine the future of crypto regulation.

The lawsuit, which complaint was filed the day before former Chairman of the Securities and Exchange Commission left the position, is based on the premise that XRP is a security and thus under the scope of the SEC.

The use of the Howey test is a key factor for the SEC action. The test which is relied upon for more than 70 years is used to determine whether a transaction should be classified as an investment contract and therefore registered as a security.

A recently published research paper by Professors at Rutgers Law School argues that the Howie test is no longer suitable for judging 21st-century innovations.

Ripple co-founder Brad Garlinghouse, however, said he is hopeful that both sides can have a meaningful conversation and settle the matter once the new SEC administration is confirmed by the U.S. Senate.

The incoming chairman, Gary Gensler, is said to be more open-minded towards cryptocurrency and he did make positive comments about Bitcoin in the past.

Judge rejects SEC access to defendants personal information

The latest win for Ripple was that Judge Sarah Netburn granted the defendants’ motion to reject the SEC’s access to eight years of co-founders Garlinghouse and Larsen’s personal information.

Prior to that, Judge Analisa Torres had granted XRP investors’ request to submit a motion to intervene.

The SEC argued that “if the Court permitted Movants to intervene, all other XRP holders, including a large class of XRP investors who has already sued Defendant Ripple Labs, Inc. (“Ripple”) for unregistered offers and sales of XRP securities, would likely seek to intervene, too. Intervention would thus create an “avalanche” of claims and “near-certainty of undue delay, complexity, and confusion”.

A significant win for the cryptocurrency firm was determined in April 6. U.S. Magistrate Judge Sarah Netburn ruled in favor of granting Ripple Labs access to the SEC internal discussions over cryptocurrencies.

Mr. Garlinghouse’s counsel Matthew Solomon believes that it could be “game over” for the whole case if the defense finds information suggesting the SEC thinks or thought XRP was akin to bitcoin or ether, which would be outside the scope of the SEC.

In March, Judge Torres dropped a ‘bombshell: “My understanding about XRP is that not only does it have a currency value but it has a Utility and that utility distinguishes it from Bitcoin and Ether.” The statement admits to XRP’s utility and currency value.

Although there is growing optimism among Ripple co-founders and XRP holders, Brad Garlinghouse said the firm is ready to march on without the XRP-based settlement platform if it loses the legal battle against the US regulator.

“We could do that. We’ve always thought about our product as ‘How do we solve a customer’s problem first and foremost?’”

Mr. Garlinghouse also called the lawsuit “ironic” as it is based on the premise that Ripple illegally sold XRP as an unregistered security, although the regulator says the courts will ultimately determine the status of the crypto asset.

“I find a certain irony that the SEC would bring a lawsuit against us because what they’re saying is not just that we should have known and we’ve acted in bad faith when the SEC themselves haven’t really said, well they know for sure that XRP is a security.

“In their own court filings, they said that the court will determine that, which of course, brings a contradiction that if the court’s going to determine that, how could I personally have known that the SEC would view XRP as a security”, he said.