Ripple CEO Brad Garlinghouse claimed that the United States Securities and Exchange Commission [SEC] intends to sue the blockchain firm over its sale of XRP which happens to be associated with the platform. The lawsuit in question will name Garlinghouse and Ripple Co-founder Chris Larsen as defendants.
The suit has not been filed yet, but will be one of the most high-profile cases of SEC actions against a leading company in the cryptocurrency industry. The latest news follows years of conflict between the company and the agency about whether XRP is a security, making it similar to a share of stock which must be registered with the SEC or a currency and thus beyond the SEC’s scope.
The SEC had previously allowed XRP to function as a currency for more than eight years. The latest decision by the Chairman of the agency, Jay Clayton to sue the company just days before the change in administration, has garnered sugnifcant amount of criticism from the crypto-communuity.
Garlinghouse lashed at the agency and said that SEC was “out of step” with other G20 countries as well as the rest of the US govt and should not be able to cherry-pick what innovation looks like pointing out that decisions such as these directly benefits China. He went on to assert that,
“Make no mistake, we are ready to fight and win – this battle is just beginning.”
It is important to note that no foreign regulator has determined that XRP is a security. In fact, Japan’s Financial Services Agency [FSA] has already made it clear that XRP is not a security. Reacting to the latest news, SBI’s Yoshitaka Kitao had recently stated that he was optimistic that “Ripple will prevail in the final ruling in the US”. Kitao further added that SBI Holdings will continue to remain a steadfast partner to Ripple, and looks forward to expanding together in Asia.
This is what Ripple’s General Counsel stated just as the news of the lawsuit emerged,
“In 2015, the US Government concluded XRP was a virtual currency. Last I checked the SEC is still part of the US Government. Here’s the plus side – the industry will finally get the clarity it deserves. Goodbye “Howey test,” hello “Ripple test.”
From the pages of history:
Back in 2015, both DOJ as well as FinCEN had settled a case with Ripple and determined that XRP was in fact a convertible virtual currency and that the blockchain firm was a money transmitter of the crypto-asset. The settlement required Ripple’s XRP transactions to comply with laws that do not apply to securities transactions.