blockchain association submitted Counsel in litigation between the U.S. Securities and Exchange Commission (SEC) and payment company Ripple. A complaint is a tool that parties use to provide the court with additional information in support of a defendant (in this case, a payment company).
In late 2020, the European Commission sued Ripple for allegedly offering XRP, an unregistered security. This case was of paramount importance in defining the regulator’s stance on the crypto industry. The consequences may affect the sector and associated companies in the years to come.
Ripple and Allies Strike Back at the SEC
In that sense, the Blockchain Association has decided to oppose the SEC and its administration led by Chairman Gary Gensler. The organization’s press release classified the commission’s actions as contrary to US law. The release said the regulator is trying to regulate by “enforcement” rather than guidance.
The former approach is perceived as hostile to companies like Ripple and many other cryptocurrency companies facing investigations or legal action from regulators. Blockchain Association executive her director Kristin Smith called the SEC’s interpretation of current U.S. securities law “a coincidence.”
Mr Smith believes the European Commission is pushing to introduce an outdated interpretation of securities law into a modern and innovative field. As a result, Ripple and others are punished. Smith added:
This was exactly the case with Ripple, where the SEC took enforcement action about two years ago alleging that the cryptocurrency company failed to register its digital tokens as security. The SEC must obey the law. We cannot impose a rigid view on the entire crypto ecosystem through enforcement action.
Additionally, Smith argued that Ripple’s fight against them is an opportunity to oppose the regulator’s “agenda.” In addition, the lawsuit could enable the modernization of U.S. securities law.
Once a security, always a security?
Jake Cervinsky, Policy Director of the Blockchain Association, said: emphasized The organization’s position with the SEC. Regulators are “harming” cryptocurrency companies and investors in these projects, Cervinsky said.
In the case between Ripple and the SEC, payment firms presented evidence of attempts to cooperate with regulators. The company was working on RippleNet and he asked the European Commission for advice and guidance in 2014.
However, the commission allegedly ignored their requests and did not classify XRP and Ripple-related projects as securities. In that sense, Chervinsky said the Gensler-led regulator expects the rules to be clear for all parties.
Those who do not meet the standards will be dragged into a legal battle. The Blockchain Association policy chief called the action “regulation by enforcement.” Chervinsky added:
The SEC’s position is wrong as a matter of law and policy (…). A fatal flaw in the SEC’s position is its inability to distinguish between primary sales and downstream transactions in the secondary market (…). A fatal flaw in the SEC’s position is its failure to distinguish between primary sales and downstream transactions in the secondary market.