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In the ongoing legal case between the SEC and Ripple Labs, the commission declared XRP as a security. However, there seem to be some twists through the unfolding events in the lawsuit.
The US Securities and Exchange Commission is one of the notable regulators in the crypto space. However, as crypto assets’ adoption and acceptance became broader, many counter activities started springing up within the industry. In addition, the increasing negative impacts and numerous losses of investors’ funds spiked the need for cryptocurrency regulation.
Several jurisdictions have different approaches to controlling and monitoring virtual assets. While some countries banned crypto assets, others exercised subtle control. Despite the rigorous methods of some watchdogs, their presence is helping to protect users.
The SEC meets aggressive enforcement action on any asset and service company that defaults on its rules. The high-handedness of the commission’s regulatory approach led to its lawsuit with Ripple XRP.
Reasons SEC Classified XRP As Security
The Ripple community is getting some calmness through the process flow from some motions filed for the Summary Judgment. According to some experts, the SEC failed to authenticate the XRP token as a security.
From the submitted motions, attorney James Filan interpreted the commission’s arguments in the case. He noted that the commission reports that it wasn’t calling XRP security. The lawyer stated that the commission intends to receive judgment on the case through the incorporated secondary sales of the token.
According to the arguments, the SEC claims that buying XRP is an investment in a common enterprise. This includes Ripple and its token holders. To the commission, the purchase remains an investment in the common enterprise through vertical or horizontal commonality.
In its line of argument, the SEC implies that XRP may not be a Security per se. But, its sales approach proves otherwise. This is because the token has no other possible sales stance but as a Security.
Commission Misses Crucial Points
Over the past few days, the Amicus Curiae in the lawsuit, John Deaton, pointed out crucial things the SEC is missing in Summary Judgment. Deaton stated the commission failed to provide any price correlation of the XRP token. Also, it could not rely on experts’ comments for its motions.
According to Deaton, the commission lacks any comment that reflects the influence of Ripple to control the price of XRP. Also, no testimony can prove that XRP holders depended on or acted on Ripple Labs’ efforts.
Recall that the SEC filed the lawsuit against Ripple Labs, accusing the firm of selling over $1.3 billion of Ripple. The commission stated that the sales were between 2013 and 2020. The drag in the case has been if XRP is a security or a currency.
Featured image from Pixabay, Chart: TradingView.com