Tuesday, September 21, 2021
HomeNewsRipple litigation with SEC enters the next round

Ripple litigation with SEC enters the next round

After several months of ongoing legal proceedings, motions and legal disputes, the legal battle between Ripple and the US Securities and Exchange Commission (SEC) seems to be far from ending.

This assumption is based on an application filed with the SEC on August 31, 2021 on behalf of Ripple Labs. The core of the application is the so-called Howey test and the question of how the SEC applied the criteria defined therein to XRP.

If you look at the chronology of the legal dispute, the current motion is particularly interesting. This is because the SEC has been asked several times in the past to explain how the Howey test should be used. However, the SEC always refused to do so.

In doing so, the supervisory authority sticks to its position that the answers to these questions are irrelevant and therefore not part of the substantive answers.

The Howey test is the basis on which the SEC determines whether an investment is a security.

The test is therefore the absolute basis for carrying out a possible classification of XRP as a security.

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One of the key factors in the test and the result thereof is the component that money or assets are invested in a joint venture or company by investors who are expecting a profit. In addition, these expected profits must be generated by the issuer, whereby the investors themselves are not allowed to have any control over them.

Why is the Howey test relevant in litigation?

The relevance of the test to the litigation between Ripple Labs and the SEC is immense. This is because the very essence of the accusation is justified by the Howey test. In other words, the SEC accuses Ripple of having raised over $ 1.3 billion from the sale of unregistered securities in the form of XRP tokens.

The legal battle between Ripple Labs and the SEC is likely to continue for a few more months. It is unlikely that the SEC will respond immediately.

Until the very end, the crucial question remains whether XRP can be declared as security, i.e. security. If Ripple loses the legal battle and XRP is declared as a security, the US company is likely to face an immense fine and set a precedent for similar crypto projects.

With the current application, however, Ripple Labs is acting proactively and attacking the SEC. The calculation here is clear: If the SEC does not manage to provide sufficient and comprehensible statements and documents for the classification of XRP as security, the prosecution will no longer have a foundation. That would make Ripple Labs the winner.

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Hasan Sheikh
Hasan, who loves technology and games, is studying Computer Engineering at Delhi JNU. He has been writing technology news since 2016.


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