He also stated that a victory in the XRP lawsuit would set a good precedent for cryptos and exchanges that have suffered from several unfavourable SEC regulations.
The case was filed 15 months ago, accusing Ripple, its CEO (Garlinghouse), and the company’s executive chairperson (Chris Larsen) of engaging in illegal activity by conducting a $1.3 billion unregistered securities offering.
Applying the Howey Test, which was obtained from a Supreme court decision, SEC hopes to draw the demarcation between an ‘investment contract’ and what qualifies to be an ‘investment security’.
The SEC claims that XRP coins were sold without being registered with the regulator. However, Garlinghouse and the company argued in their defence that XRP is a virtual currency, similar to Ethereum and Bitcoin, and that it is not registered or recognised as a security. According to their defence team, XRP should have been treated as a virtual currency rather than an investment contract.
Bad Precedent
Garlinghouse also stated in his rebuttal that if they lost the case, it would set a bad precedent for the crypto-world.
“This case is important, not just for Ripple; it’s important for the entire crypto industry in the United States. It would be negative for crypto in the United States.”
Essentially, the model would require exchanges that offer XRP to register with the SEC as security brokers. This would require everyone who owns XRP tokens to register and be identified to the SEC.
Why Ripple’s Triumph Is Important
A federal judge refused the Securities and Exchange Commission’s (SEC) plea for reconsideration of the deliberative process privilege (DPP). The court’s decision has been hailed as a significant victory for Ripple in its long-running battle with the regulator.
These winning streaks have boosted the company’s confidence and increased its chances of success in the main suit. A victory for Ripple would be excellent news for the cryptocurrency industry.