On Tuesday, the US Securities and Exchange Commission (SEC) presented a lawsuit against Ripple for failing to register XRP with the agency.
SEC accused Ripple of breaching federal securities laws when it sold its XRP tokens to retail clients and accumulated approximately $1.3 billion in seven years over ongoing sales.
Claims of XRP being a security
The lawsuit by SEC is based on whether the XRP token is a security and its sale a security offering. There is a high probability that the XRP token is security since it satisfies the Howey Test; security is any venture asset with a yield proportionate to promotion.
This lawsuit is, however, not a first for SEC. The agency has taken to court other crypto firms such as Block. One (EOS) and Sia. These firms paid a fine but did not have to answer to accusations from SEC.
What makes Ripple stand out is that it did not have an initial coin contribution. By mid-2019, however, the company had accumulated more than $1.3 billion from its ongoing sales. It remains unknown how Ripple was able to fund its operations, maintain a ‘use’ for XRP, and develop secondary trading markets without disclosing their operations.
Will not go down without a fight.
In retraction, Ripple explained that XRP crypto is a different entity from Ripple-the firm. The crypto was previously called “ripple” back in 2018 and had used the company logo but changed towards the end of that year.
The CEO of Ripple, Brad Garlinghouse, took it upon Twitter to provide more details concerning the case. He said that the SEC had gone to the ballot as of that day and decided to strike crypto. He went further to accuse SEC chairman Jay Clayton of making moves that will monopolize Bitcoin and Ethereum in the US. Brad claims this is a move to limit crypto industry innovation in the country.
Despite the ongoing charges, Garlinghouse has said that Ripple will not be deterred. As per the lawsuit, he said that his firm is well and ready to take on SEC toe to toe and is sure of a win for Ripple.