Better Markets, a nonprofit financial markets-based organization, has filed an Amicus brief to back the U.S. Securities and Exchange Commission (SEC) in its ongoing legal battle with Ripple Labs Inc. The brief presents three key arguments supporting the SEC’s position that XRP sales by Ripple qualify as securities under U.S. law, specifically under the Howey Test.
Better Markets’ Arguments in the Ripple Case
In its filing, Better Markets argues that Ripple’s sales of XRP to retail investors meet the third prong of the Howey Test, which is used to determine whether an asset is a security. The organization contends that the nature of XRP as a security remains unchanged even when it is purchased on trading platforms by retail investors.
Better Markets also criticized the previous district court ruling, which was in favor of Ripple, asserting that the ruling contradicts the Supreme Court’s definition of an investment contract as established in the Howey decision. The organization further believes that the district court failed to account for the economic realities of Ripple’s XRP sales, particularly the connection between Ripple’s efforts and the promise of profits for investors.
In response to these concerns, Better Markets urged the court to reverse the prior ruling, asserting that XRP sales on exchanges should be considered investment contracts under securities laws.
Impact of Leadership Changes at the SEC
The timing of Better Markets’ filing comes amid leadership changes at the SEC. President Biden recently appointed Paul Uyeda as acting SEC Chair, a pro-crypto regulator who is expected to pivot from the enforcement-heavy approach of his predecessor, Gary Gensler. Under Uyeda’s leadership, there is speculation that a settlement in the Ripple case could be on the horizon.
In addition to the Ripple case, other firms, including Binance and Coinbase, could see their ongoing regulatory battles with the SEC resolved or dismissed if the new leadership signals a shift away from aggressive enforcement. Commissioner Hester Peirce has been appointed to lead a newly created crypto regulatory task force, a move that has been positively received by the industry and is seen as a sign of a potential regulatory shift.
Settlement Possibilities and Future Implications
While Ripple Labs previously settled a separate case with the SEC, agreeing to pay $125 million for the sale of XRP to institutional investors, many believe that a more comprehensive settlement is possible. Pro-crypto lawyer Marc Fagel has suggested that a resolution could be weeks away, contingent on the confirmation of the new SEC Chair.
With changing regulatory dynamics and the potential for settlement, the future of Ripple and other crypto firms may be shaped by these ongoing developments in the SEC’s approach to the cryptocurrency sector.
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