Brad Garlinghouse, CEO of Ripple (XRP), is confident that his company will win the lawsuit against the Securities and Exchange Commission (SEC).
Ripple is currently being sued by the SEC for allegedly selling unlicensed securities in the form of XRP.
In an interview with Axios Fintech Reporter Lucin Shen at Collision 2022, Garlinghouse explained that he believes the law and other facts support Ripple’s argument that XRP is not a security.
“I am betting that [Ripple will win the case] just to be clear. I am betting on that not just because of the tone of the questions from the judge. I’m betting on that because I know the facts are on our side. I am betting on that because the law is on our side,” Garlinghouse said during the interview.
He also stressed that the “SEC has massively overstepped and…trying to take jurisdiction ownership over something.”
According to Garlinghouse, the watchdog “saw this gray area [that supports their argument of XRP being, in their view, a security] and decided to go in.”
So, what the SEC is implying here is that because XRP was created by Ripple, and Ripple still owns a majority of XRP, that XRP is a security. However, this completely goes against everything we know about how securities work. Such as the Howey Test.
The Howey Test says that for something to be a security, there needs to be an investment contract. And for there to be an investment contract, there needs to be an expectation of profit. And for there to be an expectation of profit, there needs to be a third party involved.
Ripple is not a third party. They’re not selling XRP to investors with the expectation of profit. So therefore, the SEC’s argument, which as per Garlinghouse, could cost Ripple over $100 million on legal fees by the time the litigation is resolved, falls flat on its face and it’s just another example of the commission’s overreach.
In fact, the cryptocurrency community has been heavily critical of this type of baseless tactics employed by the agency, which they say has had a damaging effect on the industry. The SEC has been accused of stifling innovation in the cryptocurrency space by taking a heavy-handed regulatory approach.
When asked by Shen what would happen if Ripple lost the case, Garlinghouse said that nothing will change.
“If Ripple loses the case, does anything change? It is status quo, Ripple is still growing quickly,” he said, noting that the blockchain company is already functioning as if they have lost- using this strategy to move past the case and focus on doing business as usual.
It should be noted that recently the SEC v. XRP has gone in Ripple’s favor. In fact, more than a week ago, U.S. Magistrate Sarah Netburn ordered the regulatory agency to release documents related to a 2018 speech by former SEC director William Hinman, in which he suggested that Ether (ETH) and Bitcoin (BTC) were not securities.
Ripple believes the draft speech, which the SEC refuses to surrender, would significantly aid its defense.
If Ripple is successful in the lawsuit, it would be a massive win not only for the blockchain company, but also for the crypto industry as a whole as it would pressure the commission into finally providing the much needed regulatory clarity for the emerging crypto space.
As of press time, XRP is changing hands at $0.3462, down 0.25%. The $17 billion market cap altcoin traded in a range of $0.3430 – $0.3666, indicating volatility over the last 24 hours.
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