Another entity opposes SEC’s claim in an ongoing lawsuit against Ripple.
Paradigm Requests to File Amicus Brief Against SEC’s Characterization of Crypto Assets As Securities.
Cryptocurrency-focused investment firm Paradigm has filed a motion requesting permission to file an amicus brief in the ongoing lawsuit between Ripple and the Securities and Exchange Commission (SEC).
According to Paradigm, its amicus brief is focused on shedding light on a subtle but significant distinction that will define the impact of the case on the crypto market. The company’s amicus brief is against the SEC’s characterizing crypto assets as securities. Paradigm noted that the case is beyond what is seen on the surface.
“On the surface, this case is about whether certain offers and sales of XRP tokens were securities offerings. But the SEC’s rhetoric goes further than its claims require or the law supports. It asserts that XRPtokens, and by extension many other crypto assets, are themselves securities,” it said.
Supportive Document Backing Paradigm’s Argument
Paradigm said the SEC’s attempt to conflate an investment scheme with the cryptocurrency sold in the scheme is fundamentally inconsistent with the country’s existing securities law.
The company attached as an exhibit Lewis Cohen’s book dubbed Ineluctable Modality of Securities Law: Why Fungible Crypto Assets Are Not Securities (“Why Fungible Crypto Assets Are Not Securities”).
The book published by Cohen et al. reviewed and analyzed all U.S. federal cases that have ever applied the Howey test, which the Ripple case is currently based on.
“This study confirmed that no federal appellate court has held that an asset that is the object of an investment contract transaction is itself a security, nor that a subsequent transfer of that asset would be a securities transaction (nor has the SEC cited any such authority),” Paradigm added.
Furthermore, Paradigm said it is not new to see the SEC use the Howey test to evaluate fundraising schemes. However, it is relatively new to see the same test applied to XRP tokens.
“It is the foundation upon which the SEC seeks to claim sweeping new authority to regulate not just investment offerings (its proper statutory role), but virtually the entire secondary market for crypto assets,” Paradigm added.
Attorney Deaton Excited
The recent request made by Paradigm to file an amicus brief has prompted a reaction from attorney John Deaton, the founder of Crypto Law and the legal representative of over 75,000 XRP holders in the lawsuit.
He briefly described the addition of Cohen’s study as great news on a rough day.
Very happy right now that @NYcryptolawyer’s
THE INELUCTABLE MODALITY OF SECURITIES LAW: WHY FUNGIBLE CRYPTO ASSETS ARE NOT SECURITIES, is an Exhibit to their brief!
Great news on a rough day. https://t.co/0aceYa6JNn
— John E Deaton (@JohnEDeaton1) November 12, 2022