SEC Makes Final Submission Against Ripple, Says It “Deserves” Summary Judgment

The SEC has filed its redacted reply to Ripple’s opposition to its summary judgment motion.

After the parties conferred yesterday to identify the necessary redactions in the summary judgment replies, the Securities and Exchange Commission (SEC) officially filed its redacted reply to Ripple’s opposition to its summary judgment motion.

SEC Gives Reasons Why It Deserves Summary Judgment

In a 62-page court filing seen by The Crypto Basic, the SEC asserted that it is entitled to summary judgment because the defendants did not oppose the material fact that XRP sales constitute an “investment contract” offer under Section 2(a)(1) of the 1993 Securities act.

The SEC further provided three facts proving that Ripple’s XRP offering constitutes an investment contract. According to the agency, Ripple and its executives did not dispute that the blockchain company received $2 billion from investors in exchange for XRP. In addition, the defendants did not also dispute the fact establishing the “common enterprise” prong of the Howey test.

“Ripple did not separately manage funds raised from investors, but rather pooled the proceeds from sales of XRP (Ripple’s most valuable holding at all times) and, as it promised investors, used them to fund efforts to find use and value for XRP,” the SEC asserted in its summary judgment reply.

The agency noted that the defendants’ efforts linked XRP investors’ fortunes to each other, citing an excerpt from attorney John Deaton’s amici curiae brief, which states that a Ripple loss would harm investors.

Furthermore, the SEC argued that Ripple did not dispute another essential prong of the Howey test- “the expectation of profit from the efforts of others.”

“Defendants made an avalanche of public statements indicating that they would take steps to increase XRP’s value. Partly Because of Ripple’s “giant pile” of XRP, potential and actual investors understood that Ripple was financially compelled to do just that,” the agency claimed.

Per the SEC, Ripple’s contrary argument is that many XRP investors did not consider the purchase of the crypto asset as an investment in the blockchain company. The U.S. SEC said the argument does not reflect the law, as the major question should be whether Ripple led potential investors to expect profits from the efforts of others.

“None of the defendants’ arguments to the contrary precludes summary judgment. Defendants’ primary tactic is to deflect controlling precedent with fictional tests, muddy the facts, and shift blame to the SEC,” the securities regulator said in its reply.

Ripple Files Its Summary Judgment Reply

Meanwhile, Ripple has also filed its redacted reply to the SEC’s opposition to its summary judgment motion. In the redacted reply, Ripple reiterated that its summary judgment motion should be granted because the SEC cannot prove that any XRP offer was a sale of an investment contract.

“The SEC nominally protests, claiming to have found some cases where the essential ingredients of an investment contract discussed in Howey were not present. But that claim does not hold up to scrutiny; the SECsimplymischaracterizesitscases.Ultimately, the SEC cannot point to a single case finding an investment contract without the essential ingredients identified in Howey,” Ripple noted.