After a two-year legal battle, the U.S. Securities and Exchange Commission’s case against Ripple may soon conclude.
In their most recent court filing, Ripple Labs and two of its senior executives requested a summary judgement in their favour, arguing that the SEC failed to show its case against them under the law.
The defendants contend that the SEC failed to provide critical evidence to support its statements that all XRP constituted an investment contract with Ripple and consequently a security under federal securities laws.”
Invoking the 75-year-old judgement in SEC v. W. J. Howey, the defendants asserted that the Supreme Court had established the definition of the statutory phrase “investment contract” by outlining three essential elements.
The investment contract must first entail an agreement between a promoter and an investor that establishes the investor’s rights to an investment. Second, the contract must require the promoter to perform specific steps for the investor’s advantage after the sale. Thirdly, the agreement must offer the investor the right to share in the profits generated by the promoter’s use of investment funds. According to the defendants, the SEC failed to establish all three allegations.
The defendants also argued that the SEC could not correctly regulate XRP transactions on foreign cryptocurrency exchanges or outside the geographical purview of U.S. securities laws.
In addition, they questioned the SEC’s power over crypto-assets, stating that the Securities Act did not allow the agency to regulate non-security investments.
“My hot take – after two years of litigation, the SEC cannot identify any contract for investment (that’s what the statute requires); and cannot satisfy a single prong of the Supreme Court’s Howey test. Everything else is just noise.” General Counsel for Ripple, Stuart Alderoty, tweeted. “Congress only gave the SEC jurisdiction over securities. Let’s get back to what the law says.”
My hot take – after two years of litigation, the SEC is unable to identify any contract for investment (that’s what the statute requires); and cannot satisfy a single prong of the Supreme Court’s Howey test. Everything else is just noise.
— Stuart Alderoty (@s_alderoty) September 17, 2022
Although several arguments are being discussed, including a ruling on the SEC’s objection to disclosing the Infamous Hinman speech-related papers, the most recent motion is critical because it might end the lawsuit. The SEC will file its objection to the motion on October 18, followed by a series of talks between the parties for the court to determine the issue, ideally by the end of the year.
XRP’s price has been restrained by a fog of uncertainty since April of last year. XRP is now trading at $0.38, a 19% increase over the past three days.