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Ripple SEC suit decision: XRP court ruling timing and details in full


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The XRP coin on a gavel
The SEC filed a lawsuit against Ripple In December 2020 t, arguing that XRP was an unlicensed security – Photo: Shutterstock

The Ripple court case, which has lasted since 2020, and will set a precedent for the cryptocurrency industry, could soon come to an end. Summary judgment motions have been filed by both the US Securities and Exchange Commission (SEC) and Ripple Labs, the company behind Ripple (XRP).

Stu Alderoty, Ripple’s general counsel, told Capital.com: “The filings show that the SEC is acting outside their legal limits. The SEC is not looking to apply the law – they are looking to remake the law in the hopes that it can impermissibly expand their jurisdiction."

However, recent developments, including an amicus brief – written submissions – from the Chamber of Digital Commerce, could throw off the expected timeline.

Despite this, XRP rallied throughout last week, in reaction to the first glimpse of the court case’s end.

The rally also came after Ripple’s chief executive, Brad Garlinghouse, speaking on Fox Business, criticising the SEC, saying it had “lost its way” and was “cuckoo for cocoa puffs”.

However, the breakout is showing signs of slowing down, with a lack of updates so far this week about a new schedule to the court case or any further information about the case.  

XRP to USD

Is XRP a security?

Ripple, a cryptocurrency network aiming to bring fast and low-cost payments to financial institutions, has XRP is the native cryptocurrency that powers this, which initially launched in 2013 to raise funds for the company.

However, in December 2020, the SEC sued Ripple Labs and claimed that it had raised $1.3bn by selling XRP through unregistered security transactions.

Ripple Labs’ chariman, Chris Larsen, and Garlinghouse claimed that the sales were legal. Their argument was based on the so-called Howey Test, from a US court case, which determines whether an asset is a security.

While Ripple does not deny the sale of XRP, the cryptocurrency company argues that it does not meet the criteria of the Howey Test. Specifically, Ripple argued, it did not meet the first rule, which required an investment contract.

Garlinghouse said on Fox Business: “Our point is, Ripple doesn’t have a contract. With whom is the contract? It isn’t a written contract, it’s not an oral contract, it’s not an implicit contract.”

However, the SEC argued in the summary of judgment filing that XRP met the “investment of money” criteria of the Howey Test. 

The SEC declined Capital.com's request for a comment. 

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Filings

On 17 September, both the SEC and Ripple labs filed motions for summary judgment to the judge in the case, Analisa Torres of the US District Court for the Southern District of New York.

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Two days after the filings, the court reviewed and granted the request for the Chamber of Digital Commerce, an American advocacy group for blockchain technology, to file an amicus curiae brief. The brief supported Ripple’s argument. It said:

“The court has previously asserted, correctly, that a digital asset is not a security solely by virtue of being represented in digital form or recorded on a blockchain ledger.”

The SEC took no position on the brief, according to defence attorney James Filan. However, the SEC said, it may request more time if more amicus briefs are granted.

In response, Ripple’s defence team said: “This is yet another transparent attempt to further delay resolution of this case and the court should reject it.”

Another motion was granted on 21 September that gave deadlines to motions to seal, requests that prevent evidence.

Garlinghouse then appeared on Fox Business on 22 September. He suggested it was unlikely the case would go to trial, and instead expected a ruling from the judge.

“Trials and juries are really to determine if there’s uncertainty about facts. The facts aren’t in dispute here. The law is in dispute.”

He said: “We think she has the information to make a ruling and we think that it is very clear that the SEC is grossly overreaching its authority.”

Garlinghouse criticised the SEC again on CNBC the following day. He said: “We think this is just a gross overreach of the SEC, trying to wrest control of that uncertainty that has existed [on regulatory clarity].”

Alderoty also commented on the need for regulation. He told Capital.com: “We will continue to fight this case so that the industry can get the regulatory clarity it desperately needs so that crypto innovation can flourish in the United States.”

XRP’s rally

After the filing of summary judgement motions, XRP’s price has seen a steady climb. It soared to a high of $0.55 on 23 September, a 71% increase from the $0.32 low a week earlier.

The rise was starting to slow, however, as investors waited for further information about the case. As of 27 September, XRP was trading at $0.47, up 21% over the previous seven days. 

Filan shared the schedule before the motions were filed, which said that the “parties would meet and confer to identify redactions sought by each side to the opposition briefs” on 20 October.

However, since the summary of judgement motions were published, neither party has shared an update of the schedule. The judge's office, the court clerk and the SEC were unable to comment on the likely schedule of the case. Ripple said the timeline remains the same. 

According to the schedule filed by Filan, motions to seal all materials related to the summary judgement motions would close on 22 December and closing briefs would take place before Christmas. 

Further reading

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