Ripple Says SEC Was Unable To Establish A Legal Theory to Support Its Claims That XRP Is A Security

Ripple officially files its opposition to SEC’s summary judgment motion. 

Leading blockchain company Ripple has filed its opposition to the SEC’s summary judgment motion. According to Ripple, the SEC wants to use its summary judgment motion in the lawsuit to bootstrap itself into an area where it has no jurisdiction. 

Throughout the lawsuit, the SEC is yet to establish a legal theory to support its claim that XRP is a security, Ripple noted. The blockchain company added that the SEC’s summary judgment motion did not point to any “investment contract” issued and sold by Ripple.

“The theories that the SEC does advance are insufficient to prove its case and are internally inconsistent from element to element of the Howey test,” Ripple added. 

Ripple Dismisses SEC’s Use of Howey Test in the Suit

Ripple said the SEC asked the court to ignore the expectations of On-Demand Liquidity (ODL) service, a payment solution that uses XRP for cross-border settlements. The SEC requested that the court focus on the expectations of downstream investors who bought XRP from ODL users. However, the agency did not establish whether XRP purchasers invested in a common enterprise or made any form of payment to Defendants, Ripple noted. 

“Even taking its arguments on their own terms, the SEC still fails to carry its burden to show that any element of the Howey test is met, let alone to show that no reasonable jury could disagree,” an excerpt of Ripple’s opposition read. 

As regards the “investment of money” element, Ripple said the SEC did not establish that the payment made to acquire XRP represents an investment. On the “common enterprise” element, Ripple stated that the securities regulators could not establish what a supposed enterprise is.

On the element of “expectation of profits,” Ripple said the SEC did not dispute that it can use its efforts for the benefit of XRP purchasers, adding that:

“The only basis the SEC has for suggesting otherwise is a statement from David Schwartz that Ripple is “legally obligated to maximize shareholder value.”

Ripple buttressed this point by referring to the affidavits signed by XRP holders.

🚨BREAKING: In its opposition to the @SECGov’s motion for summary judgment, @Ripple lawyers made use of affidavits signed by $XRP users (or “purchasers” as they refer to them in the document) explaining how they did not expect profits from Ripple’s efforts when they made

— Eleanor Terrett (@EleanorTerrett) October 20, 2022

Attorney John Deaton also made reference to the development. 

EXHIBIT 167. #XRPHolders make an appearance in this case. Everyone that took the time to sign an affidavit and fight back. Look at you now!!! https://t.co/OYmlpQgyWt pic.twitter.com/mSqGKNTZjO

— John E Deaton (220K Followers Beware Imposters) (@JohnEDeaton1) October 20, 2022

Ripple’s opposition to the SEC’s summary judgment comes a few hours after Joseph Grundfest, a former SEC Commissioner, gave an insight into the Howey case.

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