US Congressman Applauds Ripple Victory, Says SEC Regulation by Enforcement had a Dreadful Day in Court

The congressman said Judge Torres’ reasoning in the Ripple case ruling reflects a rigorous application of Howey, which the SEC has applied sloppily.

In the wake of Judge Analisa Torres’ ruling in the Ripple lawsuit, US Congressman Ritchie Torres (NY-15) resumed his criticisms of the Securities and Exchange Commission (SEC) over its failure to provide clear guidance for the crypto industry.

In an open letter to SEC Chair Gary Gensler, Congressman Torres said the agency’s “regulation by enforcement had a dreadful day in court.”

Crypto regulation by enforcement had a dreadful day in court.

In light of the SDNY’s landmark decision in the Ripple case, @SECGov must reassess its reckless regulatory assault on the crypto industry.

My letter to Chair Gensler: pic.twitter.com/Mrk63N4KhH

— Rep. Ritchie Torres (@RepRitchie) July 18, 2023

Judge Torres Rejects SEC Overreach

Torres’ remarks come after the SEC lost multiple fronts in its legal battle against Ripple. Recall that Judge Torres issued the much-anticipated summary judgment decision last week.

In its landmark ruling, Judge Torres ruled that XRP is not a security, adding that sales of the coins on secondary markets, including crypto exchanges, do not constitute securities.

Commenting on the development, Ritchie Torres said the judge resoundingly rejected SEC’s regulatory overreach that has seen the agency claim that all crypto assets, other than Bitcoin (BTC), are securities.

Describing the ruling as “The Torres Doctrine,” the congressman said the judge clarified that crypto assets are not securities. However, he acknowledged that these assets could be sold as part of an investment contract.

Per Torres, the judge’s reasoning in the ruling reflected a rigorous application of the Howey test, a longstanding test in the US that determines whether a transaction constitutes an investment contract. He noted that the SEC had applied the Howey test sloppily.

SEC’s Chances of an Immediate Appeal Is “Vanishingly Small”

Meanwhile, the crypto community has speculated that the SEC could appeal the ruling. Gensler disclosed on Monday that the SEC is disappointed with Judge Torres’ decision, adding that the agency is still looking at it.

Following Gensler’s remark, many believed the regulatory agency would appeal the judge’s decision.

Interestingly, Torres said the SEC’s chances of filing an immediate appeal are “vanishingly small.” According to the congressman, some issues in the case still need to be resolved, which may take time.

Torres Slams SEC Regulation Under Gensler

Furthermore, Torres blasted the SEC’s regulation tactics under the leadership of Gensler. According to him, the SEC under Gensler has not issued any rule for crypto nor provided clear guidance for the industry.

“All it [the SEC] has done is send mixed messages one after the other, not only contradicting the CFTC but often contradicting itself,” said Torres.

He added that Gensler was “all over the place” when Congress asked him earlier this year whether Ethereum (ETH) is a security.

Per Torres, Gensler’s answer to the question includes yes, no, and maybe so, which suggests that the SEC prefers to regulate and communicate by enforcement actions, not by clear rules.

He hoped that Judge Torres’ ruling would prompt the SEC to focus on bad actors who perpetrate “fraud and market manipulation.”