Ripple's (XRP) legal battle will come to an end. Instead of applying the law, the SEC will amend the law. The Ecoinomic

The legal battle between the SEC and Ripple

The legal battle between the U.S. Securities and Exchange Commission (SEC) and payment protocol company Ripple Labs (XRP) could soon come to an end if a federal judge decides the cryptocurrency company did not violate federal securities laws.

Stuart Alderoty, general counsel at Ripple Labs, thinks this could be the beginning of the end of the case that began in 2020.

“There are no allegations of fraud in this case. There are no allegations of misrepresentation. There are no allegations of market manipulation. It really is a technical issue and we believe it’s an issue that can be resolved as a matter of law by the judge.” Alderoty said.

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Both the SEC and Ripple have filed summary judgments in the U.S. Southern District Court for the Southern District of New York in an effort to avoid trial.

In December 2020, the SEC sued Ripple Labs for allegedly selling XRP as unregistered securities transactions. The SEC accused the company of selling XRP tokens and led investors to believe that they would profit significantly from the company’s profits.

The legal battle between the SEC and Ripple

Alderoty insists Ripple did not violate federal securities laws

Alderoty, who has been with Ripple for nearly four years, affirmed the position that Ripple did not meet the requirements set by the Howey Test in a U.S. Supreme Court case and asserted it was an investment contract.

“We believe that unless there is a contract for an investment, there’s no case and actually, there’s no authority for the SEC to even weigh in,” Alderoty said. “We believe that they fail on every single prong of the Howey Test.”

Aldertoy added that the SEC has not identified any investment contracts between Ripple and XRP holders and does not have any post-sale guarantees on Ripple’s behalf for investors.

“What the SEC is suggesting is that a common interest is a substitute for a common enterprise and it’s not,” Alderoty said. “We’ve made no promise to any holder of XRP that we will take steps, or are obligated to take steps, on their behalf to do those things.”

Aldertoy said that the SEC chose Ripple among various projects to alert the entire cryptocurrency ecosystem. However, the ensuing aftermath caused most U.S. exchanges to delist or suspend trading in XRP, removing “$15 billion in market cap” from Ripple, and causing the company to move operations overseas.

“Maybe they [the SEC] thought they [could] send a broader message to the entire market,” Alderoty said. “But I think what they’ve learned is that if you challenge a well-resourced company, that well-resourced company can put on a very robust defense and really expose the SEC, that what [it’s] doing in this case is not applying the law.”

The SEC is seeking to remake the law. They’re engaging in litigation behavior to further a desired result rather than a faithful allegiance to the law.” Alderoty said.