The US Securities and Exchange Commission (SEC) and Ripple Labs each want a federal judge to rule either that the crypto firm linked to the cryptocurrency XRP violated federal securities laws or otherwise dismiss the lawsuit without requiring long trial.
The SEC and Ripple both filed motions for summary judgment in the Southern District of New York, asking U.S. District Judge Analisa Torres to issue a ruling based on arguments filed in accompanying documents. The documents were released to a federal court database on Friday.
The SEC sued Ripple Labs, CEO Brad Garlinghouse and Chairman Chris Larsen in December 2020 (one day before former SEC Chairman Jay Clayton resigned) alleging that it had raised over $1.3 billion by selling XRP to unregistered securities transactions. Ripple argued that XRP sales and transactions 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 for the past few decades.
The parties have filed various discovery motions over the past two years without really challenging the real underlying issue – whether Ripple violated securities laws by selling XRP. Motions for summary judgment mean the parties are asking the court to actually decide whether either the SEC or Ripple has provided enough to prove one way or the other whether there was a violation.
The SEC argued, among other things, that various statements by Ripple executives demonstrate that Ripple sold XRP and XRP investors bought the cryptocurrency with the belief that their value would increase over time.
“Ripple has made public the various steps it has taken and would take to find a ‘use’ for XRP and to protect the integrity and liquidity of XRP markets,” the SEC said in its filing.
For its part, one of Ripple’s arguments was that there was no contract between the company and XRP investors and that there was no joint venture, one of Howey’s demands.
Many XRP holders who bought through exchanges would not know who they were buying the tokens from, the company’s filing said.
“Even if the SEC were to engage in a delayed, post-discovery transaction-by-transaction analysis to identify XRP bids and sales with contracts, its claim would fail as a matter of law. None of these contracts granted post-sale rights to the recipients to Ripple or post-sale obligations were imposed on Ripple to act for the benefit of those recipients,” the filing said.