The ongoing SEC vs. Ripple Case court case against Ripple Labs filed by US SEC alleges that Ripple has ignored laws and regulations for issuing a cryptocurrency worth more than $1 Billion in 2013.
The case has been under the purview of the US Southern District Court of New York. The outcome will decide whether the cryptocurrency, XRP, will be categorized as a security or a commodity.
Last week, Judge Analisa Torres of the U.S. District Court, Southern District of New York, issued an initial ruling. This ruling is, however, different from the Summary Judgement Ruling. The judge has issued a 57-page ruling on motions filed by both parties to exclude expert testimony from Summary Judgement Filings (Daubert Motions). In the ruling, the court struck SEC because it is yet to prove how Ripple's announcement boosts profits and how Ripple investors expected profit.
Stuart Aldetory, Ripple's Chief Legal Officer, has claimed that even if Ripple loses to SEC in this case, they will immediately go to appeal.
Recently, US SEC Chairperson Gary Gensler said most cryptocurrencies are security. He earlier called Ethereum security in June 2022. However, he does not categorize Bitcoin as a security.
Another key govt official CFTC Chairperson calls Ethereum a commodity.
Insiders in the Ripple vs. SEC case expect that the court is very close to summary judgement. They also expect that the case might even go to trial. Currently, the summary judgement proceedings (filed in Sep 2022) are going which is completely based on documentary evidence.
SEC claims that XRP is a security. However, Ripple denies the claim saying that for XRP to be a security, it has to pass the Howey Test, a set of rules used by the US Supreme Court to check whether a financial instrument is a security.
The lawsuit was filed on December 2020. SEC alleged contravention of legal regulations for issuing securities. Ripple replied to the case stating they had not received a summon or a warning before SEC filed the lawsuit. The SEC then agreed that no notice was sent to Ripple Labs. Subsequently, Garlinghouse, CEO of Ripple, filed replies to the U.S. District Court Southern District of New York.
After a long court battle, in September 2022, Ripple and SEC entered a plea for a summary judgment. A summary judgement is a court proceeding where judgement is made based on available documentary evidence without going to oral, circumstantial, or any other evidence.
The outcomes will have a severe impact on cryptocurrencies.
If SEC wins, most cryptocurrencies and their issuers will be under SEC's investigation as most of them issued securities without SEC's approval. However, Ripple will appeal the decision of the US Southern District Court of New York's decision as stated by their Chief Legal Officer.
Ripple's win will boost the cryptocurrency to break all past records and cause a broad market rally. It will liberate all cryptocurrencies from SEC's purview.