The U.S. Securities and Exchange Commission (SEC) and Ripple Labs each want a federal judge to rule that the crypto company affiliated with the XRP cryptocurrency has violated federal securities laws or otherwise dismisses the lawsuit without requiring a lengthy trial.
The SEC and Ripple both filed for summary judgment in New York’s Southern District, asking District Judge Analisa Torres to rule based on the arguments in the accompanying documents. The documents were placed in a federal court database on Friday.
The SEC sued Ripple Labs, CEO Brad Garlinghouse, and chairman Chris Larsen in December 2020 (a day before former SEC chairman Jay Clayton resigned) over allegations that it had raised more than $1.3 billion by selling XRP. in unregistered securities transactions. Ripple claimed that XRP sales and trading fell short of the principles of the Howey Test, a Supreme Court case that has served as a way to determine if something is a security over the decades.
The parties have filed several discovery motions over the past two years, without really litigating the actual underlying issue – whether Ripple has violated securities laws by selling XRP. The motions for summary judgment mean the parties are asking the court to actually decide whether the SEC or Ripple has provided enough to somehow prove whether there was a violation.
Among other things, the SEC argued that several statements from Ripple executives show that Ripple sold XRP and that XRP investors bought the cryptocurrency with the belief that their holdings would increase in value over time.
“Ripple publicly praised the various steps it took and would take to find a ‘use’ for XRP and to protect the integrity and liquidity of the XRP markets,” the SEC said in its filing.
One of Ripple’s arguments was that there was no contract between the company and XRP investors and no joint venture, one of the requirements under Howey.
Many XRP holders buying through exchanges would not have known who they were buying the tokens from, the company’s filing said.
“Even if the SEC conducted a late, post-discovery transaction-by-transaction analysis to identify XRP offerings and sales with contracts, its claim would still be legally unsuccessful. None of those contracts granted post-sale rights. to recipients to Ripple or imposed post-sale obligations on Ripple to act in favor of those recipients,” the filing said.