Judge dropped “bombshells” on SEC vs Ripple, top lawyer argues

Rick Steves

The lawsuit against Ripple alleges co-founders aided and abetted Ripple’s unregistered sales of securities, dating as far back as 2013 and 2015 respectively.

Attorney Jeremy Hogan, a partner at Hogan & Hogan, has commented on the most recent court session of the SEC vs Ripple lawsuit and referred to a “bombshell” dropped by the Judge, in where she interrupted Brad Garlinghouse’s lawyer Matthew Solomon to say:

“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.”

Attorney Solomon disagreed and said XRP is similar to Ethereum, but the Judge’s statement admits to XRP’s utility and currency value.

With currencies and securities being two different things, the SEC argument that Ripple is a security may be losing its credibility with the Judge. In regard to utility, that’s the point Ripple has been making the whole time.

The Judge also questioned the SEC attorney that, based on his theory, “everyone who sold XRP – including you and me – are selling illegal securities”. The SEC lawyer said, “no, under Section 4, only Ripple and affiliates of Ripple can have sold XRP illegally”.

This statement from the SEC lawyer clears the way for the cryptocurrency exchanges in the United States to re-list XRP again with no fear of reprisal.

The lawsuit against Ripple alleges co-founders aided and abetted Ripple’s unregistered sales of securities, dating as far back as 2013 and 2015 respectively.

In its answer, Ripple stated it had “never offered or sold XRP as an investment” and that “XRP holders do not acquire any claim to the assets of Ripple, hold any ownership interest in Ripple, or have any entitlement to share in Ripple’s future profits.”

In addition, the cryptocurrency firm argued that “utility depends on XRP’s near-instantaneous and seamless settlement in low-cost transactions. Treating XRP as a security, by contrast, would subject thousands of exchanges, market-makers, and other actors in the gigantic virtual currency market to lengthy, complex, and costly regulatory requirements.”

Of the 23 major financial market jurisdictions, nine of them haven’t taken any form of enforcement action against crypto-related companies, and the remaining jurisdictions have a more lenient approach compared to the SEC in a deliberate strategy to appeal to fintech startups.

Acknowledging that the size of the U.S. cryptocurrency market is a contributing factor to the SEC’s high rate of intervention, a research paper by Rutgers School of Law Professor Yuliya Guseva argues the Howey test is a key factor for the SEC action and it is no longer suitable for judging 21st-century innovations.

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