Ripple’s Chief Legal Officer, Stuart Alderoty, expressed his optimism that a U.S. representative member will read a ruling that supports XRP’s non-security status during the upcoming testimony of the SEC Chair, Gary Gensler. The testimony is scheduled for September 28, 2023, and will cover various topics related to the crypto industry.
Ripple vs SEC: A Long Legal Battle
Ripple, the company behind the XRP cryptocurrency, has been engaged in a legal dispute with the U.S. Securities and Exchange Commission (SEC) since December 2020. The SEC accused Ripple and two of its executives of conducting an unregistered securities offering worth $1.3 billion through the sale of XRP tokens. Ripple denied the allegations and argued that XRP is not a security, but a digital asset that facilitates cross-border payments.
The case has seen several twists and turns, with both parties filing motions, requesting documents, and seeking expert opinions. One of the key issues in the case is whether XRP meets the criteria of the Howey Test, a legal framework that determines whether an asset is a security or not. The SEC claims that XRP satisfies the Howey Test, while Ripple contends that it does not.
A Partial Victory for Ripple
On July 13, 2023, Ripple scored a partial victory in the case when Judge Analisa Torres ruled that XRP is not necessarily a security on its face. The ruling was based on the analysis of several different sales methods of XRP over time, and their implications for the Howey Test. The judge found that some sales of XRP by Ripple to institutional buyers do count as unregistered securities offerings, but others do not.
The ruling also implied that XRP can be treated differently depending on the context and purpose of its use. For example, XRP can be considered a security when it is used for fundraising or investment purposes, but not when it is used for payment or utility purposes. This distinction has significant implications for the crypto industry, as it suggests that the same token can have different legal statuses depending on how it is used.
A Hopeful Outlook for Ripple
Following the ruling, Ripple’s CLO Stu Alderoty expressed his hope that a U.S. representative member will read the ruling during the testimony of the SEC Chair Gary Gensler. Gensler is expected to answer questions from the House Committee on Financial Services about the SEC’s approach to regulating the crypto industry. Alderoty believes that the ruling will help educate the lawmakers and regulators about the benefits and challenges of crypto innovation.
Alderoty also said that Ripple is confident that U.S. banks and other financial institutions will start showing interest in adopting XRP for cross-border payments after the ruling. He said that Ripple expects to resume talks with potential customers in the U.S. about its On-Demand Liquidity (ODL) product, which uses XRP for money transfers. He added that Ripple is hopeful that this decision will give financial institutions comfort to start exploring how XRP can solve their real-world problems.
Ripple’s CLO also reiterated that Ripple is open to settling with the SEC, as long as it does not compromise its vision and mission. He said that Ripple wants to work with regulators to create a clear and consistent framework for crypto innovation in the U.S., and to ensure that XRP can continue to serve as a bridge currency for global payments.