Cryptocurrency firm Ripple Labs Inc. sought to defeat a Securities and Exchange Commission lawsuit by claiming that its XRP token is not a security subject to the authority of the regulator.
Over the weekend, Ripple filed a motion to dismiss the lawsuit ahead of trial in federal court in Manhattan. The company argued that XRP cannot be considered a security because there was no “investment contract” that gave investors rights or required the issuer to act in their interest.
In a 2020 lawsuit, the SEC accused Ripple and its top executives of misleading XRP investors by failing to register the digital asset as a security and failing to provide proper disclosure. The case is expected to help define the commission’s ability to regulate cryptocurrency assets and could affect dozens of other digital currencies.
The regulator is seeking to exercise jurisdiction over any asset transfers that it “believes may benefit from the registration and disclosure requirements of securities laws,” Ripple said in its filing over the weekend.
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“The SEC’s untethered position would turn the sale of all kinds of ordinary assets – diamonds, gold, soybeans, cars, and even works of art – into securities sales. Congress has not given the agency such authority,” Ripple said.
The regulator also requested a ruling in its favor without a trial, saying that the purchase of the token is an “investment in a joint venture with other XRP holders and with Ripple” and that investors expected to make a profit buying the token.
“Defendants cannot dispute the content of their many public statements about Ripple and XRP,” the SEC said. “The Defendants also cannot dispute the vast history of the efforts they made according to those representations or the economic reality: Ripple financed its business by touting the profit potential of XRP, selling and distributing XRP to public investors while keeping a large amount for itself. of XRP. ”
In a statement, Ripple General Counsel Stu Alderoty said that “filed documents show that the SEC is acting outside its legal bounds. The SEC is not seeking to enforce the law, it is seeking to remake the law in the hope that it may impermissibly expand its jurisdiction.”
The case is SEC v Ripple Labs Inc., 20-cv-10832, US District Court, Southern District of New York (Manhattan).