The United States court hearing the Securities and Exchange Commission’s (SEC) case against Ripple Labs has approved the filing of several amicus curiae briefs by non-party entities, including some made in support of the SEC’s contention that Ripple’s offering of XRP amounted to an unlawful unregistered securities offering.
The SEC’s case against Ripple Labs has drawn a lot of informal comment throughout the industry: to some, the regulator’s pursuit of Ripple is a sign that action is finally being taken against non-compliant digital asset offerings; to others, it’s an example of a massive overreach which could be fatal to the development of the industry.
But it’s also drawn formal amicus curiae applications from people on both ends of the spectrum. An amicus curiae brief is a submission made in a case by a person or entity that is not a party to the action but has some strong interest in it (amicus curiae is Latin for ‘friend of the court’). In this case, 16 companies have requested to make formal submissions in SEC vs. Ripple. On Monday, Judge Analisa Torres granted permission to all 16.
The group is made up mostly of ‘crypto‘ interest groups for whom unchecked initial coin offerings (ICOs) and their analogs are bread and butter: the likes of Coinbase (NASDAQ: COIN), which complains in its proposed brief that ‘rather than engage in rulemaking, the current SEC administration has sought to expand the SEC’s jurisdiction over the cryptocurrency industry through ad hoc enforcement actions, alleging on a retrospective basis that already-trading digital assets… are actually securities subject to SEC regulation.’
But others are filing briefs in support of the SEC, including InvestReady and the New Sports Economy Institute.
“Just like this crypto industry, which suffered its latest huge failure yesterday morning as FTX fell into the hands of Binance, which itself is facing a multitude of investigations and lawsuits for their own practices, the arguments put forth by Ripple and the Amici are a house of cards that is falling faster than Luna’s price did the day it crashed,” it read.
“The token holders weren’t building a payment system, Ripple was. They can argue that some of the nodes were non-Ripple owned and somewhat decentralized, but that decentralization does not alone account for the fact that they are the software engineers primarily working on the project and that they control more than half of the supply of the token.”
The New Sports Economy Institute wrote in its proposed brief that “crypto is like a chameleon engaging in regulatory arbitrage, branding itself as an asset when it wants to attract capital and appeal to ‘investors’ but a currency when it faces regulatory scrutiny.” Those ‘investing’ in these assets need the protection of the Securities Act, it argues.
Ripple’s hopes of prevailing in its defense against the SEC, which hinges on whether or not XRP amounts to a security, suffered a setback last week when the SEC won a similar case against LBRY, another digital asset offeror. The court granted the SEC’s summary judgment application against that project, saying that ‘LBRY made no secret in its communications with potential investors that it expected to grow in value through its managerial and entrepreneurial efforts’ and that ‘no reasonable trier of fact could reject the SEC’s contention that LBRY offered LBC as a security, and LBRY does not have a triable defense that it lacked fair notice.’
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