(Kitco News) - Ripple Labs Inc. and the U.S. Securities and Exchange Commission (SEC) are ready to see an end to the lawsuit that began in December of 2020 as both parties filed motions asking Judge Analisa Torres to make a summary judgment on the case.
In two separate motions filed with the U.S. District Court for the Southern District of New York on Saturday, both the SEC and Ripple Labs asked the judge for a summary judgment, which is a type of judgment delivered on the basis of statements and evidence without a full trial.
Summary judgment motions are typically filed when either party does not have a contention with the facts of the case and wants to avoid a long, drawn-out process.
The SEC originally filed the lawsuit against Ripple, alleging that its sale of XRP, which is the native token of Ripple Labs’ XRP Ledger, constitutes an offering of unregistered securities now worth more than $1.38 billion.
Ripple’s executive chairman Chris Larsen and chief executive officer (CEO) Brad Garlinghouse were listed as codefendants on the lawsuit for allegedly aiding and abetting the moves by Ripple.
In the new filing by the SEC, the securities watchdog asserted that Ripple does not deny that they offered and sold XRP for “money,” which meets the “investment of money” element of the Howey test and thus should be considered as the sale of a security.
According to the SEC’s website, an investment contract under the Howey test “exists when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”
In its counter-filing, Ripple argued that it “had and has no contract at all with many XRP recipients and was not even involved with most XRP trading in the secondary market.”
The company further elaborated that even if some investors bought XRP for the purpose of speculation, “that does not make it an investment contract,” noting that many assets are bought with the hope of selling at a higher price without becoming securities.
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Ripple is also arguing that the SEC has no jurisdiction over XRP since the token was sold on overseas exchanges, and is contending that the XRP is not a security under the Howey test as its transfer does not involve an investment contract.
“When asked in discovery, the SEC refused to identify a contractual basis for a single offer and sale of XRP. Thus, because the Securities Act’s definition of an ‘investment contract’ requires an underlying contract, the SEC has no case to take to trial,” Ripple wrote in its motion.
According to a tweet from Ripple CEO Brad Garlinghouse, “the SEC isn’t interested in applying the law. They want to remake it all in an impermissible effort to expand their jurisdiction far beyond the authority granted to them by Congress.”
How this case eventually plays out is of great interest to cryptocurrency proponents as its outcome could dictate how the SEC classifies crypto assets moving forward. The regulator currently considers most crypto assets as securities that need to be registered under securities law.
