Ripple’s chief legal counsel calls out SEC Chair Gary Gensler for evading questions in a recent Congressional hearing.
Stuart Alderoty, the chief legal officer (CLO) for blockchain company Ripple, is the latest to share his thoughts on a recent congressional testimony by Gary Gensler, the chairman of the United States Securities and Exchange Commission (SEC).
Alderoty has been spearheading Ripple’s court case against the regulatory agency, hinging on whether XRP constitutes a security under US federal laws. The Ripple CLO was less impressed with the answers that the SEC Chairman gave to Congress when questioned on related key subjects such as what constitutes security under US laws.
According to Alderoty, the SEC chair “smugly evaded question after question” posed by several Congressmen during the hearing. However, the Ripple CLO singled out a moment during which the SEC Chair was fazed by questions posed by Rep. Ritchie Torres, who represents New York’s 15th Congressional District.
A must watch. For hours Mr. Gensler smugly evaded question after question (even laughing about how rich he is) until Rep. Torres took him out with a command of the law and a touch of South Bronx street sense. Gensler didn’t know what hit him until it was too late. https://t.co/RzAK4inkHE
— Stuart Alderoty (@s_alderoty) September 28, 2023
SEC Chair struggles to defend broadened definition of investment contract
During Wednesday’s hearing, Rep. Torres expressed concerns that the SEC had broadened its interpretation of an “investment contract” to mean anything the agency decides. Hence, his questions to the SEC Chair revolved around an investment contract, especially with the SEC using the principle as a basis to allege that nearly all cryptocurrencies are securities.
The New York Rep. analyzed the famous Howey Test, which the SEC has repeatedly cited as the basis for its securities-related crypto lawsuits such as the ones against Ripple and Coinbase.
Rep. Ritchie Torres also referenced an August research by six law professors (preeminently including a Yale University professor), which proves that no decision of the Supreme Court has ever found that a scheme that does not involve a “contract” between two parties could qualify as an “investment contract.”
The SEC chair struggled to answer when queried on whether any past Supreme Court cases had found that an investment contract could be considered such without an actual contract. Instead, Gary Gensler eventually evaded the question and said he would leave the answer to the “very fine attorneys of the SEC in the front of courts.”
Meanwhile, Rep. Ritchie Torres noted that Gensler’s inability to provide an answer to the question is “baffling” since the investment contract principle is the foundation on which the SEC has pursued legal action against crypto-related entities.
Time will tell whether other crypto companies at loggerheads with the SEC will adopt the same reasoning presented by Rep. Ritchie Torres in future court hearings.