Ripple vs. SEC: Top Lawyer Spotlights Judge’s Critique of Agency’s Direction

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Written By Maya Cantina

Tue, 2/04/2024 – 15:48

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Ripple Chief Legal Officer Stuart Alderoty has highlighted a key observation made by Judge Analisa Torres in the Ripple lawsuit.


Alderoty’s spotlight on Judge Torres’ critique underscores a significant point of contention: the SEC’s application of the Howey test to cryptocurrency assets.

Judge Torres, in one of her rulings in the Ripple case, noted that the SEC had strayed far from the original intent of the Howey test. According to Alderoty, Judge Torres recognized that the SEC’s broad application of the test to crypto assets did not align with cases where promoters made direct promises to investors about a clearly defined enterprise.

The Ripple CLO made this crucial observation while reflecting on the recent Coinbase ruling.

U.S. District Judge Katherine Polk Failla ruled in the past week that the U.S. Securities and Exchange Commission’s lawsuit against Coinbase can move forward, while partly granting the crypto exchange victory.

Alderoty refers to a portion of the ruling, which he inferred had four different confusing definitions of what constitutes a crypto “ecosystem.” He explains further: According to the SEC, whenever a token is acquired, it represents an investment in an amorphous “ecosystem,” regardless of why, how or where it was acquired.

This fact brought up Judge Torres’ observation in the Ripple-SEC lawsuit, which, according to Alderoty, “looked at the full evidentiary record and understood the SEC had strayed far from Howey, where a promoter made promises directly to investors about a clearly defined enterprise.”

On March 26, the SEC filed its motion for remedies and the entry of a final judgment, a memo in support of that motion, and a “proposed” judgment in the Ripple case. Moving forward, the main dates to watch in the Ripple-SEC dispute are April 22, when Ripple will respond to the SEC on the $2 billion it seeks in penalties, and May 6, 2024.


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