Just yesterday, Live Bitcoin News reported that the Securities and Exchange Commission (SEC) was looking into the possibility of suing Ripple, one of the top five cryptocurrency ventures in the world. Now, it looks like “looking into” has become “taking legal action,” as the governing financial agency has filed charges against the firm for allegedly ignoring securities advice and selling unregistered tokens.
Ripple and the SEC Will Go Head to Head in Court
There has been a lasting argument regarding Ripple. The company itself has long stated that the asset it offers – XRP – is not a security and qualifies as a legitimate currency. However, the SEC feels differently, as do many of XRP’s initial investors. This will not be the first lawsuit the company faces. The first was a class-action suit brought on by many of the company’s initial financial players, who claim executives lied about XRP’s status and that the asset should have been fully presented as a security from the beginning.
One of the big problems with Ripple – and one of the factors probably working against it at the time of writing – is that many of the XRP units in circulation are still owned by the company, thereby suggesting that Ripple is a centralized company. The big issue behind bitcoin, Ethereum and several other forms of crypto is that they have been largely distributed to the public at this point, and no single individual or company owns a large majority of the units in question.
However, Ripple still possesses roughly 60 percent (more than half) of the world’s XRP units. Thus, the ones who primarily stand to gain the most out of XRP are its creators. This knocks any ideas of decentralization for Ripple to the side. In a statement, Stephanie Avakian – SEC Enforcement Division director – explained:
Issuers seeking the benefits of a public offering, including access to retail investors, broad distribution and a secondary trading market, must comply with the federal securities laws that require registration of offerings unless an exemption from registration applies.
Naturally, Ripple’s CEO Brad Garlinghouse is contesting these words and rushing to defend his company and its assets, stating:
To be clear, this is all based on their illogical claim that XRP is, in their view, somehow the functional equivalent of a share of stock.
The Lawsuit Is Pointless…
In addition, Ripple lawyer Michael Kellogg of Kellogg, Hansen, Todd, Figel & Frederick believes that the lawsuit initiated by the SEC has no basis. He mentions:
This complaint is wrong as a matter of law. Other major branches of the U.S. government including the Justice Department and the Treasury Department’s FinCEN have already determined that XRP is a currency. Transactions in XRP thus fall outside the scope of the federal securities laws. This is not the first time the SEC has tried to go beyond its statutory authority. The courts have corrected it before and will do so again.