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The ongoing battle between fintech firm Ripple and the US Securities and Exchange Commission (SEC) may be over. However, the regulator’s chances of victory are diminishing according to legal experts.
Crypto legal experts have indicated that the SEC could be looking at “breakthrough benefits” in its case against Ripple. The ruling against the regulator will severely limit its ability to oversee the regulation of the crypto asset sector. This is a huge win for industry and innovation in the US
On October 30, senior analyst Roslyn Layton told Forbes: “If that ends, it’s a disaster of their own making from the beginning.”
The Ripple fight
The SEC took action against Ripple and two senior executives in December 2020. It accused the company of conducting an unregistered sale of its XRP token. Earlier this month Ripple CEO Brad Garlinghouse called the SEC’s failure to release key documents “shameful.”
Ripple owners have been fighting with tokens for nearly two years, and their case is getting stronger. In addition, more than 75,000 XRP investors have joined the cause and filed amicus briefs in support of Ripple.
“The SEC had no ally, even its own expert witnesses who ended up giving a shot to the defense,” Layton wrote.
Attorney Jeremy Hogan said the SEC can only win if Judge Torres, who is presiding over the case, “forgets his first year in law school.”
Other prominent legal experts also agree that Ripple is on the way to victory. These include Curt Levey of the Federalist Society and Professor JW Verret of George Mason University’s Scalia Law School.
Reverse Howey Test
Verret said the SEC could appeal to the Supreme Court and likely lose. This can invalidate or invalidate the use of the Howey Test to classify cryptocurrencies.
SEC Chairman Gary Gensler is using this test to say that crypto assets are securities. The Howey Test, defined in 1946, determines what qualifies as an “investment contract” and therefore a security. A contract is an “investment in a common enterprise with a reasonable expectation of profit from the actions of others.”
Ripple has already agreed to settle and pay a fine if the SEC declares that XRP is not a security. However, it seems that Gensler and friend. will strive to continue fighting even if it is a losing battle.
A victory for Ripple would not only see token prices rise, but could also set a precedent to prevent the SEC from mislabeling cryptocurrencies as banks and breaking regulatory authority.
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