Ripple and SEC are facing a turning point

Three days ago, the Securities and Exchange Commission (SEC) and Ripple Labs separately, but concurrently, asked that the US District Court judge for the Southern District of New York issue a summary judgment regarding the alleged violation of laws by the parent of XRP over the sale of its units of the currency.

The lawsuit between Ripple and the SEC

The history between the two litigants starts way back, when in 2020 the SEC had sued the San Francisco-based company, its CEO at the time of the events and the current one.

Judge Analisa Torres had long ago come to the American company’s aid by denying an SEC motion against Ripple’s defense guilty of not having been notified about the fact that the SEC considered irregular the sale of XRP tokens that took place in 2013. 

Stuart Alderoty, general counsel of Ripple Labs had stated in this regard: 

“Today’s order makes it clear that there is a serious question as to whether the SEC has ever given Ripple fair warning that its distributions of XRP – since 2013 – would ever be prohibited by securities law. 

It’s nice to see the judge dismiss the SEC’s attempt to prevent Ripple from pursuing its fair warning defense. It is even more imperative that the sun set on the SEC’s “regulation by enforcement” approach.”

Given the pressure from both sides of the litigation and having collected enough pleadings to issue a verdict two years after the SEC subpoena related to the alleged collection of $1.3 billion through the sale of unregistered securities, Analisa Torres is getting ready for the moment of truth. 

The SEC is of the position that the sales of XRP represented some sort of investment contract while Ripple Labs, through its CEO Brad Garlinghouse and his predecessor Christian Larsen, have repeatedly explained how this does not match the truth.

Brad Garlinghouse, in particular, in a tweet on 17 September referring to the motion for summary judgment explained that:

“Today’s documents make it clear that the SEC is not interested in applying the law. They want to redo everything in an impermissible attempt to expand their jurisdiction far beyond the authority granted to them by Congress.”

In its request to Judge Torres, Ripple Labs wrote among other things:

“The SEC’s case comes down to an overly broad claim of jurisdiction over any transfer of an asset. This is not and should not be the law, because without these essential features there is nothing to which the Howey test can meaningfully be applied.”

Stuart Alderoty, general counsel of Ripple Labs argued that:

“After two years of litigation, the SEC is unable to identify any investment contracts and cannot meet a single requirement of the Supreme Court’s Howey test.”

The news that could lead to the end of the litigation and the price of XRP

The news of a so-called abbreviated court case sparked euphoria in the XRP community, which saw the currency skyrocket to $0.40, a value not seen since last March even though it has since reversed slightly around $0.34.

The current price of XRP is also below the value it recorded before the lawsuit filed by the Securities and Exchange Commission in 2020 when it was around $0.7. 

Over time the currency also reached $1.4, a figure recorded in September 2021 but with the advent of the bear market XRP also suffered the fate of other cryptocurrencies that except for brief periods of recovery have all lost value. 

This period of high volatility, although with widely low prices, in Ripple’s case even lower than the levels litigated, have fostered large investments from the so-called “whales” who are estimated to have holdings touching 6% of their portfolios. 

The investment is considered an all-in both in the short term given the high volatility that could be easily exploited by investors and for long positions in view of a pump resulting from any positive outcome or in substantial settlement of the lawsuit between Ripple and the SEC. 

The ruling is expected by the end of the year and could prove to be a real whale hit with returns of double the initial investment if XRP regains pre-suit levels and even touching a for four if the currency buoyed by the positive news of the court victory hits its highs again. 

In times of bear market, the investment would indeed prove to be profitable and a so-called godsend, not to mention unexpected since usually when the SEC enters the court it usually takes home the win. 

This time things seem to be different for the Commission, but the final word is up to Judge Torres and until there is an official ruling it will not be possible to sing victory nor will we see big price changes in the crypto market for XRP.