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The U.S. Securities and Exchange Commission (SEC) response A recent court ruling against Ripple Labs argued that XRP is not a security when sold to retail investors.
Ripple’s comments were made in a separate filing in the ongoing SEC lawsuit against Terraform Labs and its founder Do Kwon for billion-dollar cryptocurrency securities fraud allegations.
The SEC said the ruling contradicted fundamental principles of securities law, including the Howie test, a set of criteria that determine the nature of investment contracts.
“Regarding programmatic and other sales, the SEC respectfully denies that Ripple is adding contradictory and unsubstantiated requirements to Howie and its descendants.
SEC Files Response in Do Quon Lawsuit, Alleging Judge Analisa Torres Mistakes in Do Quon Lawsuit #XRP Judgments have been made and authorities may appeal. Kicker: “Ripple’s reasoning cannot be reconciled with all of these fundamental securities law principles.”
— Dave Michaels (@davidamichaels) July 21, 2023
Terraform Labs attempted to dismiss the lawsuit, citing the Ripple Labs ruling as a possible precedent. However, the SEC responded by saying it disagreed with the decision on XRP and dismissing the lawsuit against Kwon.
“Ripple has mistakenly created two different ‘reasonable investor’ standards, one for institutional investors and one for retail investors, but it goes against Howie to create such a subjective dichotomy,” the SEC said. The committee further alleges that Ripple is using “typically less sophisticated” investors to take a subjective view of XRP as a security.
These declarations surfaced shortly after SEC Chairman Gary Gensler’s remarks. Admitted In a recent interview with Yahoo Finance, he expressed his disappointment with the court’s ruling that XRP sold to retail investors is not a security.
“So the public investor comes first, and that’s how our securities laws were written first. Companies raise money, and markets likewise protect them and protect the integrity of markets.
Gensler was also asked whether the court’s ruling, particularly during his talk on artificial intelligence at the National Press Club, indicated an urgent need to establish clear regulations for the industry. But Gensler declined to give a specific answer.
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SEC Chairman Gary Gensler speaks out on Ripple XRP ruling for first time since court ruling last week pic.twitter.com/0lOzJEDs1e
— Whale (@WhaleChart) July 17, 2023
“While we are disappointed by their statements regarding retail investors, we are still monitoring and evaluating them.”