Ripple’s Chief Legal Officer (CLO), Stuart Alderoty, expressed discontent with the recent statements made by the U.S. Securities and Exchange Commission (SEC) Chair, Gary Gensler, during a congressional hearing before the U.S. Senate Appropriations Committee on July 19.
Ripple CLO says Gensler is misinterpreting the law
In the hearing, Gensler reiterated his stance that certain cryptocurrency tokens can be categorized as securities. Alderoty took issue with Gensler’s repeated emphasis on this point, stating that it is outrageous and a misinterpretation of the law, including the Howey test. He questioned the SEC’s persistence in propagating these beliefs about tokens being deemed as investment contracts.
The dispute comes after a significant legal victory for Ripple on July 13 when the company obtained a landmark ruling. The ruling clarified that programmatic sales, which involve sales executed on exchanges, of Ripple’s native token, XRP, should not be classified as securities. Alderoty celebrated this verdict, affirming that XRP was unequivocally not a security as a matter of law.
Ripple’s CEO, Brad Garlinghouse, also weighed in on the ruling’s importance, highlighting how it directly challenged the SEC’s claims that most tokens inherently fall under the category of securities. He believed that the ruling could potentially set a positive precedent for other digital tokens within the United States.
During the congressional hearing, which aimed to review the SEC’s budget for fiscal year 2024, Gensler made statements that hinted at the possibility of many cryptocurrency tokens being subject to the Securities Act. He pointed out that there is generally an entrepreneurial group behind these projects, suggesting that the SEC’s regulatory oversight could extend to a wide range of crypto assets.
When questioned by Senator Richard Durbin about safeguarding American consumers from potential risks related to cryptocurrencies in the future, Gensler emphasized the SEC’s robust authority in overseeing such matters. He explained that very few cryptocurrencies would fall outside their jurisdiction.
Debate on the regulator oversight of crypto ongoing at the Congress
Interestingly, Gensler singled out Bitcoin as an asset that does not meet the attributes of an investment contract under securities laws. Consequently, he clarified that bitcoin falls under the jurisdiction of the SEC’s sibling agency, the Commodity Futures Trading Commission (CFTC).
The ongoing debate surrounding the classification of cryptocurrencies has far-reaching implications for the industry. As the SEC continues to scrutinize various tokens, the determination of whether they are securities or not holds significant implications for their regulatory treatment and potential legal consequences.
Ripple’s legal victory adds to the complexity of the crypto regulatory landscape, setting a precedent for how other tokens may be evaluated in the future. The ruling could offer clarity to other projects navigating the challenging regulatory environment and potentially influence how the SEC approaches similar cases in the future.
As the crypto industry evolves, discussions around the regulatory status of tokens will persist, and companies like Ripple will continue to advocate for clear and fair regulatory guidelines. The outcome of these discussions could shape the future of cryptocurrency adoption and innovation within the United States and beyond.
The ongoing discussions on regulatory oversight and classification have broader implications for the crypto industry, impacting how various tokens are treated by regulatory authorities. As the industry evolves, the clarity and consistency of regulatory guidelines will play a crucial role in shaping the future of cryptocurrencies in the United States.
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