beincrypto.com
The U.S. Securities and Exchange Commission won another victory over a crypto project this week. The outcome has raised concerns over its battle with Ripple, but things may not be that bad.
Earlier this week, the SEC notched up another enforcement win over a digital asset project. It accused LBRY of selling unregistered securities on its decentralized video publishing platform and won the case.
The crypto community reacted with concern that this could set precedence for the rest of the industry. At the time, the LBRY team warned:
“The language used here sets an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security, including Ethereum.”
Why Ripple Case Is Not The Same
On Nov. 9, CryptoLaw posted ten reasons why the SEC’s latest victory won’t affect Ripple.
CryptoLaw is a YouTube channel backed by John E. Deaton, who is fighting on behalf of more than 75,000 XRP investors.
Deaton said that the first reason was that the judge was following the SG case. This case from 2003 was brought against a company operating a “virtual stock exchange” that ended up being a Ponzi scheme. The Ripple judge is not following the SG case, he said.
Furthermore, the different cases the SEC has won have been in different circuits, which have different applicable laws. There are 12 regional circuits in the U.S. legal system, organized from the 94 U.S. judicial districts.
The Ripple case is being held in the second circuit, which is Connecticut, New York, and Vermont. The LBRY case was in the first circuit of New Hampshire. Deaton added that the SEC chose an obscure company in a small jurisdiction because “they had a favorable judge and wanted to get a favorable ruling.”
Flawed Reasoning
According to the SEC, it doesn’t matter if the issuer did not promote the asset in any way. Judge Torres, who is presiding over the Ripple case, could find that this is flawed reasoning. Deaton exclaimed:
“In 76 years of case law no investment contract has ever been found when there’s no connection between the purchaser and the seller.”
Furthermore, the XRP Ledger has utility to it. It is supported by MasterCard and Visa and used as a substitute for fiat in some cases.
Finally, several international jurisdictions, such as the UAE, Japan, the UK, Singapore, and Switzerland, have declared XRP is not a security.
The Ripple XRP asset has taken a massive hit during today’s market slump. As a result, it’s down 10% on the day, trading for $0.387 at the time of press.