As the lawsuit that the United States Securities and Exchange Commission (SEC) launched against Ripple Labs in 2020 carries on, the blockchain company introduced new arguments in a motion seeking to dismiss the lawsuit, filed over the weekend.
Specifically, Ripple argues that the XRP tokens it issued can’t be considered securities as there was no “investment contract” giving investors rights or obliging it to act in their interests, Bloomberg’s Chris Dolmetsch reported on September 19.
As a reminder, the SEC claims that the blockchain firm was issuing the tokens without the regulator’s permission and failing to register them as securities, which it argues was in breach of the country’s securities laws.
‘No investment contracts’
Indeed, Ripple’s newest argument, citing the lack of investment contracts, seeks to affirm that the XRP token it is accused of selling without proper approval, is not a security and therefore not subject to the regulator’s authority.
According to Ripple’s weekend filing:
“The SEC’s untethered position would convert the sale of all types of ordinary assets – diamonds, gold, soybeans, cars, and even works of art – into sales of securities. Congress has given the agency no such authority.”
At the same time, Ripple’s defense attorney James K. Filan quoted the SEC’s statement that “it takes no position on Chamber of Digital Commerce filing amicus brief but asks to respond and may request more time or pages if additional amicus briefs are allowed.”
Earlier, Ripple General Counsel Stu Alderoty tweeted his comments stating that the SEC was “unable to identify any contract for investment,” and that it “cannot satisfy a single prong of the Supreme Court’s Howey test,” adding that “everything else is just noise.”
In late July, Ripple’s CEO Brad Garlinghouse expressed his opinion that his company would prevail in the legal battle against the regulator, which he believes “massively overstepped,” as Finbold reported.
Jurisdiction over Ethereum?
Meanwhile, a comment in a different SEC lawsuit indicates the possibility of a case for U.S. jurisdiction over the Ethereum (ETH) blockchain, according to a report by Bloomberg’s Suvashree Ghosh on September 20.
As it happens, the SEC filed the suit on September 19 against the founder of a crypto investment research firm, claiming it failed to disclose incentives related to an initial coin offering (ICO).
However, the suit also details the movement of Ethereum tokens linked to the case as originating in the U.S. and “validated by a network of nodes on the Ethereum blockchain which are clustered more densely in the U.S. than in any other country.”
According to Elizabeth Morton, a research fellow at the Australian RMIT Blockchain Innovation Hub, the major issue here is “the problems over jurisdiction of blockchain activities more generally.”
As she added, “multiple jurisdictions with their own regulatory frameworks can make independent claims.”