In response to Ripple's opposition to its move for summary judgment, the SEC has submitted a redacted reply.
The Securities and Exchange Commission (SEC) officially submitted its redacted reply to Ripple's opposition to its summary judgment motion after the parties met yesterday to discuss the necessary redactions in the summary judgment replies.
SEC Provides Arguments for Why Summary Judgment Is Deserved
The SEC argued that it is entitled to summary judgment in a 62-page court document obtained by The Crypto Basic because the defendants did not contest the crucial fact that XRP sales qualify as a "investment contract" offer under Section 2(a)(1) of the 1993 Securities Act.
Three additional facts from the SEC further support the claim that Ripple's XRP offering qualifies as an investment contract. The government claims that Ripple and its leadership did not contest the fact that investors sent the blockchain business $2 billion in exchange for XRP. Furthermore, the defendants did not contest the evidence supporting the Howey test's "common enterprise" component.
The SEC stated in its summary judgment response:
“Ripple did not separately manage funds raised from investors, but rather pooled the proceeds from sales of XRP (Ripple’s most valuable holding at all times) and, as it promised investors, used them to fund efforts to find use and value for XRP,”
The agency used a paragraph from lawyer John Deaton's amici curiae brief, which claims that a Ripple loss would hurt investors, to point out that the defendants' actions connected XRP investors' fortunes to one another.
The SEC further asserted that Ripple did not challenge “the expectation of profit from the efforts of others.” which is another crucial component of the Howey test.
The agency stated:
“Defendants made an avalanche of public statements indicating that they would take steps to increase XRP’s value. Partly Because of Ripple’s “giant pile” of XRP, potential and actual investors understood that Ripple was financially compelled to do just that,”
According to the SEC, Ripple's counterargument is that a significant portion of XRP buyers did not view their purchase of the cryptocurrency as an investment in the blockchain startup. The main issue should be whether Ripple misled potential investors into believing they would receive benefits from the labor of others, according to the U.S. SEC, who stated that the reasoning does not reflect the law.
According to the securities regulator's response:
“None of the defendants’ arguments to the contrary precludes summary judgment. Defendants’ primary tactic is to deflect controlling precedent with fictional tests, muddy the facts, and shift blame to the SEC,”
Ripple Submits its Response to Summary Judgment
In the meantime, Ripple also submitted its redacted response to the SEC's opposition to its application for summary judgment. The SEC cannot establish that any XRP offer was a sale of an investment contract, Ripple reiterated in its redacted reply, hence its petition for summary judgment should be granted.
Ripple noted:
“The SEC nominally protests, claiming to have found some cases where the essential ingredients of an investment contract discussed in Howey were not present. But that claim does not hold up to scrutiny; the SECsimplymischaracterizesitscases.Ultimately, the SEC cannot point to a single case finding an investment contract without the essential ingredients identified in Howey,”
