Eleanor Terrett, a Fox Business correspondent, has stated that if the judge rules that secondary market transactions of LBC by people unaffiliated with or without investment intent in LBRY are legal, it may set a precedent that is favorable to XRP users.
After this update, it appears as if the scales have shifted in favor of Ripple in the Ripple vs XRP lawsuit. There is a new update on this lawsuit and things are not looking good for the SEC.
Does Ripple have an advantage over the SEC?
Attorney John Deaton stated that US SEC lawyers and staff have been discussing the tokens as securities. While Bitcoin (BTC) was previously packaged, marketed, offered, and sold as an investment contract.
This, however, is referred to as Security. It is crucial to remember that just because someone used BTC as a security doesn’t mean that Bitcoin itself has become a security. According to the attorney, the logic remains the same in the XRP lawsuit.
The primary distinction between security and utility tokens is the purpose for which they are issued. If the coins were issued primarily to raise funds for something, they are security tokens. And it makes no difference whether tokens can be used to pay for goods and services on the platform.
Is the Judge likely to Rule in Favor of Ripple?
If the Judge believed that the token itself was a security, the statement would include subsequent sales of the token, according to the attorney. The Judge, however, stated that his decision does not apply to any subsequent sale of LBC tokens.
This turns out to be the most important reason why the Court’s clarification was desperately needed by crypto holders. However, a promoter’s direct sales of a token can still result in a commission. Meanwhile, in an investment contract case, the underlying asset is never the security.
The recent development, according to Amicus Curiae in the XRP lawsuit, gives him confidence that the Judge will deny the SEC’s Summary Judgment motion.
The Final Ruling is Near
For the longest time now, it appears like Ripple has had an upper hand in this lawsuit. The case is now in its concluding stage and its outcome would be very crucial for the entire crypto community. Ripple is working to make sure that, as of a certain date, or at least in the future, none of the XRP sales will be considered securities.
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Qadir AK
Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.
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An administrative judge on Tuesday, May 25th, 2021, gave a fresh breath of hope to Ripple, the embattled global payments company in its long-standing legal battle with the United States Securities and Exchange Commission (SEC).
The case started in late 2020 when the SEC accused Ripple, a blockchain-based payments company, of violating US securities laws. Ripple, its CEO Brad Garlinghouse, and Co-founder Chris Larsen were sued for their alleged sale of unregistered securities worth over $1.3 billion.
Tuesday’s hearing, the latest in the on-going saga, provided a glimmer of hope for Ripple, after Judge Sarah Netburn questioned the SEC’s legal argument for why XRP – Ripple’s blockchain-based virtual currency – constituted a security.
Judge Netburn said that “if XRP is a security – and my preliminary view is it isn’t – then that’s a securities law issue and not necessarily a commodities law issue.” Judge Netburn’s comments appear to show a growing inclination against the SEC’s assertion, strengthening Ripple’s position.
The development is significant because the SEC’s case has the potential to not just deal a blow to Ripple, but also roil the entire cryptocurrency market. If XRP is held to be a security, it means other digital assets such as Bitcoin and Ethereum could also come under the purview of the SEC.
The SEC’s position challenges Bitcoin’s status as a currency, which would mean that potential users would then become liable to taxes and other obligations associated with holding a security, something that could drastically reduce its appeal.
Since thus far, no such obligations are associated with Bitcoin, it could potentially set up a chain of events with widespread implications.
Ripple, however, is faring better than its counterparts. Its prices are currently up 90% since the SEC filed the charges, while Ethereum and Bitcoin are down by 4% and 1.9% respectively.
The case is set to continue with the judge setting a deadline of middle of June for both parties to submit briefs based on the judge’s comments on Tuesday.
The SEC, however, still has a strong case and nothing can be said conclusively at this point. The growing consensus still is that the SEC is likely to be successful in its case, however what Tuesday’s hearing did do was to remind us of the aptness of the old adage that justice delayed is not justice denied.
