The outcome of SEC Lawsuit Against Ripple Could Determine How Cryptocurrencies Will Be Classed.
There has been a major argument in the United States about which cryptocurrency should be classed as a security.
Crypto enthusiasts have called on the U.S. Securities and Exchange Commission to establish guidelines that would help determine which cryptocurrency falls under its regulatory purview.
In 2017, the SEC heeded these calls and issued its guidelines for this purpose.
However, crypto-related companies believe the guidance was insufficient to help industry players determine which coin or token is a security.
Ripple’s Legal Battle With SEC
Since the guidance was issued, thousands of cryptocurrencies have launched, with the SEC slamming charges on 56 cryptocurrency projects so far because they conducted unregistered securities sales.
Most cryptocurrency projects opted for settlements and never considered going to court. Famous cryptocurrency firm Ripple is among the projects charged by the SEC for raising $1.4 billion via the sale of its native coin XRP.
Unlike other charged crypto projects, Ripple refused to settle with the regulators, as the company is determined to continue its lengthy legal battle with the SEC, proving that XRP does not fall under the oversight of the securities regulators.
Ripple has reiterated that XRP is a currency like bitcoin and ethereum and not a security as stated by the SEC. However, the Securities and Exchange Commission thinks otherwise.
Crypto Community Anticipating the Lawsuit Outcome
The lawsuit filed against Ripple, which is expected to end by next year, could go a long way to determining how over 10,000 cryptocurrencies should be classed.
At the moment, the entire crypto community is observing how things will play out to know what decision to make.
“Either way, we are going to have an opinion that would be used by other players in the space to inform how they act and decisions that they make,” Katherine Dowling, general counsel at Bitwise Asset Management, said.
A win for the SEC could back regulators’ commitment to impose stricter regulations in a bid to protect investors. At the same time, a loss would see several crypto enthusiasts demand that congress develop a holistic legal framework for the U.S. crypto industry.
Ripple has already made significant efforts lobbying Congress so that other federal agencies like the Commodities Futures Trading Commission (CFTC) can have a bigger stake in crypto regulation.
According to a Wall Street Journal (WSJ) report, Ripple splashed $1.1 million on lobbying last year, with part of the funds spent on backing legislation that could see crypto firms decide whether they want their projects to be overseen by CFTC.
Ripple believes they are clear, and the SEC has no jurisdiction to declare Ripple security.
“We believe the record is clear that XRP is not a security and that the SEC does not have jurisdiction over this matter,” Martin Flumenbaum, an attorney at Paul, Weiss, Rifkind, Wharton & Garrison LLP, who represents Mr. Larsen, told Wall Street Journal.
“Trying to squeeze digital assets, which are more akin to commodities than securities, into a securities regulatory framework simply doesn’t work,” said Stu Alderoty, Ripple’s general counsel. “All roads don’t lead to the SEC because the SEC doesn’t have a rational regulatory framework.”