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Passing through the arrivals hall of Washington's famous Union Station, passengers encounter a number of fast food restaurants, cafes and the occasional retail store. About 100,000 people pass through it every day, many of them from Wall Street, running public business on New York's Amtrak. Others are locals trying to make do with the D.C. suburbs and, of course, tourists visiting the nation's capital.
Amidst the chaos was a large blue billboard that read, "Cryptocurrency Means Business." Below is the name of the billboard's sponsor, Ripple.
Travelers not connected to the crypto industry may see the sign at the train station as an advertisement for another company. What many may not know is that Ripple is one of the biggest names in the crypto industry, a provider of cross-border payment solutions using blockchain technology.
© Courtesy of FOX News The US Securities and Exchange Commission (SEC) is headquartered in Washington, DC January 28, 2021 - A major battle rages on Wall Street as heroes battle for the fate of video game giant GameStop. Trading network. As of the end of January 27, 2021, the Securities and Exchange Commission has announced that it is monitoring the activity. (Photo by Saul Loeb/AFP) (Photo by Saul Loeb/AFP via Getty Images) (Photo by Saul Loeb/AFP via Getty Images)Little do they know that the ad at Union Station is actually symbolic. The lobby is at the headquarters of Wall Street's top police arm, the US Securities and Exchange Commission, in the lobby on the way down the hall to the lawyers and bail bondsmen.
For two years, the SEC has been involved in a high-profile case with Ripple, the outcome of which could determine the scope of cryptocurrency oversight proposed by SEC Chairman Gary Gensler. The Union Station ad is not only a way for the company to promote its products, but also a message from the Ripple SEC that they won't back down.
As FOX Business previously reported, in 2020 the SEC charged Ripple and its executives with violating securities laws by selling the XRP digital token to finance their business. The SEC says that Ripple should have registered XRP as a security. Ripple XRP is not a security so the sale is completely legal.
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Gensler, who will head the U.S. Securities and Exchange Commission in 2021, is actively pursuing civil lawsuits. People close to him say he hopes the court victory will cement his position as the top regulator of cryptocurrencies. More importantly, it could give Gensler absolute authority to guarantee the safety of all digital coins except bitcoin as he tries to crack down on abuses and corruption that have spread across the $1 trillion industry.
© Courtesy of Fox Business. The Securities and Exchange Commission, along with the agency, is exploring ways to list cryptocurrency trading platforms, board chairman Gary Gensler said Monday, April 4, 2022. (Photo by Evelyn Hochstein-Pool/Getty) ) Image) Photo credit: Evelyn Hochstein- Pool/Getty ImagesAs the case wound its way through federal court, the crypto business was left in a regulatory vacuum. Is the SEC or Commodity Futures Trading Commission the primary regulator governing futures and currency contracts? Is a digital asset a security, a commodity, a currency, or something else?
These legal problems will disappear soon. Manhattan District Judge Analiza Torres is likely to rule in the coming days on the landmark ruling, called summary judgment, and could win against Ripple or the SEC, according to lawyers handling the case. Judges can also order the case to go to trial, which could delay much-needed regulatory transparency in the industry for years.
The SEC did not respond to requests for comment. A representative for Ripple declined to comment.
In recent months, Judge Torres has sided with Ripple in several actions, including requests for emails and other documents with SEC officials, to show that the agency may be unfairly targeting Ripple. The documents also purport to show how the SEC failed to give Ripple a so-called "fair notice" stating that the sale of XRP was illegal after the company began issuing tokens.
Many observers have sided with Ripple, criticizing the fair interpretation of the law by judges and some of the litigation tactics used by SEC lawyers. Now they weren't so sure. With the development of the algorithm and the collapse of the FTX cryptocurrency exchange in November, as well as founder Sam Bankman's fraud-free lawsuit, many in the crypto industry say that this will be a complete victory for Ripple. To be difficult. . The collapse of two of the biggest crypto-friendly banks, Silvergate and Signature, could also hurt earnings.
Mark Fagel, former regional director of the SEC's San Francisco office, said: "I think the SEC has a stronger case on the fundamental legal issue that Ripple is offering unregistered securities to the public." “The question of whether Ripple received 'fair notice' that XRP is a security is escalating. Even here, I don't see a compelling case for a lawsuit, even if the SEC's mistakes cause it.
For many reasons the results are important, there is still no standard classification of digital assets. As such, the legal status of cryptocurrencies is open to interpretation by the SEC and CFTC, leading to a war of sorts in Washington over who should control the asset class. It also determines whether the SEC's current test for classifying securities as digital assets should be applied. Derived from a 1946 Supreme Court decision known as the Hawaii Test, it defines what qualifies as an investment contract and is therefore subject to US securities laws.
The SEC's main argument is that Ripple is breaking the law by selling XRP as an investment contract to buyers who rely on their efforts to increase profits. If the judge rules with the SEC, it means that several other digital coins will be classified as unregistered securities.
While Ripple has denied selling XRP, the crypto company said it failed the Hawaii test because there was never an investment agreement between Ripple and the buyer of the XRP token.
“We mean Ripple has no contract. Who is the contract with? It's not a written contract, it's not an oral contract, it's not an implied contract," Ripple CEO Brad Garlinghouse told FOX Business, "Claman's September" Graf."
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The difficulty of selling XRP on the secondary market, i.e. selling tokens on exchanges to retail investors, makes this issue particularly important to the cryptoinvestor community. When the SEC sued Ripple in December 2020, exchanges like Coinbase and Crypto.com removed XRP from their platforms, so investors could no longer buy or sell the tokens, effectively leaving their accounts in limbo.
The total losses of small investors and project developers using the XRP Ledger are estimated at 15 billion dollars. After the SEC filed the lawsuit, XRP dropped 70% in a few days. It rose to a high of $3.84 in 2018, and is currently trading at $0.46.
This caused outrage among retail investors, and Rhode Island attorney John Deaton was appointed amicus curiae ("friend of the court") to represent aggrieved XRP owners in the lawsuit.
In addition to Dayton, sixteen industry players and organizations, including Coinbase and The Blockchain Association, filed affidavits on behalf of Ripple or the crypto industry as a whole. By comparison, the SEC has only received two court filings to support its lawsuit against Ripple.
"This issue has the potential to set a precedent that will impact not only the digital asset industry, but the capital markets as well," Perrian Boring, founder and CEO of the Digital Commerce Council, said in a statement to FOX Business. "We prefer that industry players have clear instructions on how to operate, rather than being monitored by law enforcement."