Ripple vs SEC: Legal battle reaches final verdict

In the latest development of an ongoing lawsuit, both Ripple and the SEC have opposed each other’s proposals for summary judgment.

Previously, Ripple and the Securities and Exchange Commission filed proposals for summary judgment. If granted, a judge will rule on the case, barring the need to go to trial later.

However, last Friday, the two sides filed separate motions to refuse to file the other’s summary judgment. The SEC said that Ripple’s offer should be rejected because of “indisputable evidence” that it illegally sold unregistered securities. The federal regulator had prosecuted the company on this basis in December 2020. Meanwhile, Ripple claimed that the SEC had no legal basis for insisting on Ripple Register XRP as a security.

Important documents revealed last week

Earlier, Ripple revealed in the revelation of some documents that it had previously requested six times. These were the SEC’s notes on the so-called Hinman documents. They reportedly reveal the SEC’s comments on a speech by William Hinman, the former director of the Corporate Finance Division.

In the speech, Hinman said that while he previously considered Ethereum a security, his later understanding of blockchain-based transactions led him to believe that “the current offering and sale of Ether are not securities transactions.”

Ripple sought to issue these notes, believing that they demonstrate the SEC’s awareness of Hinman’s claim that Ethereum is not a security. Applying a similar principle, Ripple believes that this will strengthen their case that XRP should not be considered a security.

Documents may not be enough

No matter how high Ripple is, a legal expert argues that the opinion of a former SEC official may be irrelevant. They argue that the final decision rests with the Supreme Court, which has consistently upheld the Howe test standard.

According to this standard, a security is essentially defined as “an investment of money in a common enterprise with a reasonable expectation of profit to be derived from the efforts of others.” Using this definition, SEC Chairman Gary Gensler believes that most cryptocurrencies would count as securities. One notable exception is bitcoin, which he said would be classified as a commodity.

Nevertheless, according to another analysis, several XRP holders submitted affidavits clarifying that they did not have the intention behind their purchases. According to Exhibit 167 of Ripple’s proposal to be rejected by the SEC, those who bought XRP were “not expected to profit from Ripple, for investment purposes, but from market movements or other sources.”