“How did you apply Howey Test to XRP?” – Ripple demands answers from SEC

  • Ripple has filed a motion that questions how the SEC applied the Howey test to XRP and deemed it a security.
  • A New York court has denied an application by the Chamber of Digital Commerce to join the case as a ‘friend of the court.’

How did you apply the Howey Test to determine that XRP is a security? This is the question that Ripple and its chairman Chris Larsen have posed to the U.S Securities and Exchange Commission. In their latest motion, they claimed the SEC has been dodging this question and want the court to compel them to answer it. Elsewhere, the court has dismissed an application by the U.S Chamber of Digital Commerce to join the case as amicus curiae (friend of the court).

Ripple has been attempting to get the SEC to lay out the process it used to determine that under the Howey Test, XRP is a security. “The SEC has refused to provide this information, contending that Defendants are seeking irrelevant information,” the company revealed.

This is not good enough for Ripple and Larsen (CEO Brad Garlinghouse abstained from filing this motion for undisclosed reasons). The firm is seeking binding statements from the SEC “necessary to narrow the scope of litigation, reduce the element of surprise, [and]serve as admissions for trial.”

In one of its interrogatories, Ripple wants the SEC to identify all the terms of contract that it claims created an expectation of profits for XRP purchasers. This is in line with its contention of the Howey Test which claims that for an asset to be deemed a security, a person has to invest money in a common enterprise while being led to expect profits solely from the efforts of the promoter or a third party.

In past responses, the SEC has pointed to public statements in which it claims Ripple led XRP holders to believe it would undertake activities that would yield profits for them.

The SEC is playing cat-and-mouse, Ripple says

If XRP is a security under the Howey Test, then the SEC bears the burden of proving that XRP purchasers relied on Ripple’s efforts to increase the value of XRP.

Once again, the SEC has given an evasive response to this as well. “Ripple has engaged in efforts that led XRP purchasers to reasonably expect profit based on Ripple’s efforts,” it stated previously.

The SEC should not be permitted to play cat-and-mouse on this issue.

And in an even more contentious argument, Ripple wants the SEC to make a binding statement on whether it claims that XRP holders held some share of Ripple. This is an essential element of Howey, the company claims, and as such, the SEC must commit to a response.

On its part, the SEC claims that this is irrelevant to the lawsuit.

“If, as Defendants believe, there is no evidence that XRP holders had any expectation of any future right to payments from Ripple, the SEC must affirmatively state this in a form that can be used at trial,” Ripple’s motion added.

Elsewhere, the court has denied an application by Lilya Tessler to appear Pro Hac Vice as counsel for amicus curiae the Chamber of Digital Commerce. Lilya had filed the motion on August 31, seeking to represent the chamber, which is a Washington, D.C-based blockchain and cryptocurrency advocacy group, in the Ripple vs. SEC lawsuit.

In its ruling, the court stated that Lilya “does not represent a movant in the case.”

Related: SEC vs Ripple: Regulator stumbles in its argument against producing internal documents


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Steve has been a blockchain writer for four years, and a crypto enthusiast for even longer. He is most excited by the application of blockchain to solve the challenges facing developing nations.

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