The US Securities and Exchange Commission (SEC) and Ripple Labs are asking a federal judge to rule that the crypto company affiliated with the cryptocurrency XRP violates federal securities laws or otherwise defy the law without requiring a lengthy trial.
The SEC and Ripple filed motions for summary judgment in the Southern District of New York, asking District Judge Analisa Torres to rule based on the arguments filed in the accompanying documents. The documents were posted to a federal court database on Friday.
The SEC sued Ripple Labs, CEO Brad Garlinghouse and Chairman Chris Larsen in December 2020 (a day before former SEC Chairman Jay Clayton stepped down from the role) over allegations that it raised over $1.3 billion by selling XRP in unregistered securities transactions. Ripple argued that the sales and trading of XRP did not meet the principles of the Howey Test, a Supreme Court case that has served as a way to determine whether something is a security in recent years.
The parties have filed various discovery motions over the past two years, without litigating the actual underlying issue — whether Ripple violated securities law by selling XRP. The motions for summary judgment mean that the parties are asking the court to actually decide whether the SEC or Ripple have enough suppliers to prove one way or another whether there was infringement.
The SEC argued, among other things, that various statements from Ripple executives show that Ripple investors sold XRP, and XRP investors bought the cryptocurrency with the belief that their holdings would spike in value over time.
“Ripple went public with the various steps it was taking and would take to find a ‘use’ for XRP and to protect the integrity and liquidity of the XRP markets,” the SEC said in its filing.
For his part, one of Ripple’s arguments was that there was no contract between the company and XRP investors, and that there was no common enterprise, one of the requirements under Howey.
Many XRP holders who were buying through exchanges would not know who they were buying the tokens from, the company’s filing said.
“Even if the SEC were to conduct a transaction-by-transaction post-discovery analysis to identify XRP offers and sales with contracts, its claim would still fail as a matter of law. It is not one of those contracts granted post-sale . the rights of the recipients against Ripple or placed post-sale obligations on Ripple to act in the best interests of those recipients,” the filing said.