Ripple's CLO Explains SEC Ruling: "XRP Is Not a Security."
July 14, 2023 5:54 AM
The chief legal officer of Ripple Labs has provided an analysis of Thursday's verdict in the U.S. Securities and Exchange Commission (SEC) vs. Ripple case. He emphasized that while the landmark verdict is "a huge win" for the crypto company, "as a matter of law - XRP is not a security." Additionally, he pointed out that cryptocurrency exchange sales are not securities either.
Stuart Alderoty, Ripple Labs' chief legal officer, described the verdict in the Securities and Exchange Commission (SEC) v. Ripple lawsuit in a series of tweets on Thursday. The lawyer stated:
"XRP doesn't count as a security, which is a significant win today. Also, as a matter of law, exchange sales are not securities. Executive sales are not securities. Other XRP distributions, such as those to developers, charities, and workers, are not securities."
According to the court's findings, direct sales of XRP to institutional clients in the past are the sole activity that establishes an investment contract. Alderoty stated, "The court's order restricts further proceedings to these institutional sales." Ripple's chief legal officer emphasized:
"The judge's judgment validates so much of what this industry is fighting for, and demonstrates that the SEC does not have unrestricted power over cryptocurrency... Perhaps we can now begin a logical discussion regarding crypto regulation in this country."
The SEC said in a statement→ to Fox Business on the ruling, "We are pleased that the court found that Ripple offered and sold XRP tokens as investment contracts in breach of the securities laws under certain circumstances." The court agreed with the SEC that the Howey test defines the securities analysis of crypto transactions and rejected Ripple's invented test for what represents an investment contract, instead emphasizing that Howey and other cases have shown that a variety of tangible and intangible assets can be the subject of an investment contract. Furthermore, the court dismissed Ripple's reasonable notice argument, stating that the Howey test is unambiguous and that claiming ignorance is not a defense to securities law violations. We will continue to consider the decision."
Many people criticized the SEC's announcement regarding the ruling. Katie Biber, Paradigm's chief legal officer, tweeted: "SEC statement on Ripple reminds me of a young campaign hack spinning bad facts vs a powerful government agency expected to tell the truth." "Perform better."
Alderoty agreed with Biber, tweeting: "Could not agree more with Katie Biber." The SEC issued a pathetic statement today. Accept the defeat. You deserved it."
Congressman Tom Emmer (R-MN), a staunch supporter of clear crypto laws, tweeted→ in response to the verdict on Thursday:
The Ripple case is a watershed moment in proving that a token is distinct from an investment contract that it may or may not be a part of. Let us now make it law.