Key Takeaways
- Better Markets filed an Amicus brief supporting the SEC against Ripple Labs, emphasizing investor protection.
- The district court’s ruling excluded XRP’s secondary market sales from securities regulation, sparking concerns.
- Legal precedents affirm the broad application of the Howey test to cryptocurrency offerings.
Non-profit organization Better Markets has stepped into the Ripple vs. SEC legal battle, filing an Amicus brief supporting the SEC’s appeal. Better Markets argued that the district court’s exclusion of secondary trading platform sales from securities laws undoes essential investor protections for XRP.
According to the brief, such an exemption puts both retail and institutional investors at risk of significant fraud in the fast-changing cryptocurrency markets. Ripple’s public marketing of XRP as a valuable digital asset runs diametrically opposite to the court’s reasoning.
Better Markets said the Howey test definition of an investment contract is broad, be the assets purchased outright or on an exchange. The nonprofit said this decision needs to be overturned if the SEC is to continue protecting and effectively regulating crypto markets.
Legal Precedents Contradict District Court’s Ruling
Better Markets cites the earlier decisions like SEC v. Terraform Labs and SEC v. Coinbase, which have established that the secondary market trading is still about the effort put in by the issuer. The brief criticized the district court’s focus on sophistication criteria among retail investors, as that does not represent any legitimate principle of law in conflict with the economic realities of today’s markets.
The organization underscores that Ripple actively targeted the retail investors through promotions, promising profits linked to the development of the ecosystem surrounding XRP. In failing to appreciate this, it says, the court missed addressing perhaps the most key investor protection goals underlying the securities laws.
Ripple Decision Risks Investor Harm
The district court’s decision could set a dangerous precedent, potentially allowing other crypto offerings to evade regulation by exploiting technicalities.
Better Markets warns this would harm crypto investors and disrupt broader securities markets. The brief urges the court to reverse the ruling to safeguard millions of everyday investors enticed by unregulated crypto schemes.
Ripple’s argument that secondary XRP sales differ from direct sales undermines the broad protective scope of the Howey test. Better Markets concludes that aligning the case with established legal principles is essential to uphold market transparency and fairness.
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