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The U.S. Securities and Exchange Commission has indicated it may appeal the recent ruling in the Ripple Labs lawsuit, which deemed XRP not a security when sold to retail investors.
The SEC argued that the ruling violated “fundamental principles of securities law,” such as the Howie test for determining whether a contract is an investment contract.
Do we really want judges to ask themselves, “Will my rigorous application of the Howie test in this case result in 2023 consistent with the policy implications behind the 1934 law?” https://t.co/acMNRc00B6
— John E Deaton (@JohnEDeaton1) July 22, 2023
The SEC’s latest comments on the Ripple Labs case came in a separate lawsuit against Terraform Labs and its founder, Do Kwon, for allegedly “engaging in a multi-billion dollar cryptocurrency securities fraud.”
According to the SEC’s July 21 response to Terraform Labs’ motion to dismiss, in which defendants referenced a potentially precedent Ripple Labs decision, the SEC highlighted a number of issues it has with the court’s recent ruling on XRP.
“Contrary to defendants’ contentions, much of the Ripple judgment supports the SEC’s arguments in this case and rejects the arguments made here by defendants. However, with respect to programmatic and other distributions, the SEC politely denies that Ripple is adding contradictory and unsubstantiated requirements to Howey and its progeny,” the SEC said, further adding:
“With all due respect, these portions of Ripple were erroneously determined and should not be followed by this court. The SEC staff is considering various avenues available for further review and will recommend that the SEC seek such a review.”
Related: XRP Price Seeks New Bullish Opportunity To Cause Move Above $1
The SEC statement comes just days after SEC Chairman Gary Gensler expressed disappointment that the court had deemed XRP not a security if sold to retail investors.
“I am pleased that the Court has stated that […] Tokens for institutional investors are securities […] Another aspect regarding individual investors was disappointing. We are still looking at it and we are considering it,” Gensler said in a July 17 interview with Yahoo Finance.
On the same day, Gensler also appeared at the National Press Club to give a talk on artificial intelligence, and was asked if the court’s ruling indicated an urgent need to establish clear regulations for the industry.
Gensler, however, could not provide a concrete answer to that.
The SEC, who claims the court didn’t follow Mr. Howie, is rich… The SEC acknowledged on its website that the Fed’s courts needed commonality, but went on to say that they neither sought commonality in their analysis, nor viewed commonality as a separate part of Howie. If the SEC… https://t.co/CX6Kwfh3cJ
—exlawyer.eth/tez (@exlawyernft) July 22, 2023
magazine: Cryptocurrency Regulation — Does SEC Chairman Gary Gensler Have the Final Decision?
