Ripple’s legal chief criticizes the SEC’s claims in the Coinbase lawsuit as ‘baseless’ and unsupported, highlighting ongoing challenges in regulating cryptocurrencies.
Key Points
- Ripple’s Stuart Alderoty criticizes the SEC for ‘baseless’ claims in the Coinbase lawsuit.
- The SEC accuses Coinbase of functioning as an unregistered securities exchange and cites the Howey Test in their allegations.
- The SEC’s references to the XRP ruling in the Coinbase case have been declared inaccurate and unsupported by Alderoty.
- Despite previous rulings, debates on the application of the Howey Test to cryptocurrencies continue among legal authorities.
Stuart Alderoty, the legal chief of Ripple, a real-time gross settlement system, currency exchange, and remittance network, has taken issue with the U.S. Securities and Exchange Commission (SEC) and their recent legal brief, which requests the court to rebuff Coinbase’s plea to dismiss the SEC lawsuit.
Filed on June 6, 2023, the SEC’s complaint charges Coinbase with operating as an unregistered national securities exchange, broker, and clearing agency.
There is so much wrong with the SEC’s brief in the Coinbase case I don’t know where to begin. Let’s start with the SEC claiming, without citation or support, that digital assets have no innate or inherent value while collectible baseball cards do.
— Stuart Alderoty (@s_alderoty) October 5, 2023
SEC Goes for XRP
In its defense, the SEC references the XRP ruling from October 3, 2023, claiming Coinbase erred in its citation.
The ruling by Judge Analisa Torres posited that Ripple was not in violation of U.S. federal securities laws when selling tokens to retail consumers.
However, the SEC persists in its belief that certain crypto assets listed on Coinbase qualify as investment contracts under the Howey Test. According to the agency, token issuers lead investors “reasonably to expect the value of their investment to increase.”
The pivotal Howey Test, which determines whether transactions qualify as investment contracts, also played a significant role in the XRP lawsuit’s Summary Judgment on July 13, 2023.
On October 4, 2023, Judge Torres denied the SEC’s motion to file an interlocutory appeal, underscoring that the SEC failed to elucidate how the court “improperly applied the Howey Test” in the Ripple lawsuit context.
Alderoty is explicit in his critique of the SEC’s brief in the Coinbase lawsuit, describing the claims as “baseless” and lacking “citation or support.”
This viewpoint echoes the earlier criticisms from lawyer John Deaton, who represents numerous XRP token holders in the SEC lawsuit.
Deaton asserted that the SEC failed to reference a single lawsuit where the sale of crypto tokens was associated with the application of the Howey Test.
Concluding Thoughts
This ongoing legal skirmish underlines the tumultuous and evolving relationship between regulatory bodies and the cryptocurrency world.
The disputes about the application of traditional financial regulatory tests, like the Howey Test, to the rapidly evolving world of digital assets manifest the gaps in existing financial laws when dealing with new-age assets like cryptocurrencies.
Ripple’s Alderoty and lawyer John Deaton are emphasizing a critical point: without clear precedents and concrete regulatory frameworks for cryptocurrencies, accusing platforms like Coinbase using traditional frameworks might be viewed as arbitrary or inconsistent.
Legal battles like these underscore an urgent need for a well-rounded, clearly defined, and universally applicable regulatory framework that considers the unique nature of digital assets.
This not only aids in avoiding such legal impasses but also fortifies investor trust and facilitates the maturation of the cryptocurrency domain.
