Ripple to SEC: XRP Is not a Speculative Investment

Ripple continues to assert that XRP is a tool to transfer value across borders and not a speculative investment.

Did Ripple (CRYPTO: XRP) really violate U.S. securities law because it sold its native token, XRP, an unregistered security? Cryptocurrency investors and the rest in the crypto space await the final verdict on the U.S. SEC lawsuit versus Ripple, which was filed on December 21, 2020.

The regulatory agency contends that Ripple has conducted an illegal security offering, and that XRP is a security, not a cryptocurrency. While it facilitates cross-border payments, crypto investors earn a fee. SEC alleges that defendants Ripple Labs Inc. and two of its senior executives raised over US$1.3 billion through an unregistered, ongoing digital asset securities offering.

Ripple counters that XRP is a useful tool for transferring value across borders through Ripple products, rather than it is a speculative investment vehicle. Excitement builds as the case drags on because the court’s decision could have a material impact on cryptocurrency regulations. Meanwhile, the lawsuit has prevented XRP from taking flight.

crypto blockchain

Image source: Getty Images

Important dates

The contending parties can’t claim a firm upper hand yet due to the court’s rejection of their respective motions. It denied SEC’s motion to reject the defendants’ fair notice defense and also denied Ripple’s claim that there’s no fair notice showing the illegal coin distribution in the highly volatile cryptocurrency market.

The New York Southern District Court, through Magistrate Sarah Netburn, has ordered the SEC and Ripple to come to an agreement regarding the briefing schedule for summary judgment motions. Netburn said, “The parties are directed to meet and confer as to a briefing schedule for summary judgment motions.”

The magistrate adds, “The parties shall submit a joint proposed schedule for the Court’s approval no later than one week after the SEC’s submission.” Individual defendants must submit their motions or answer on April 8, 2022. On the other hand, the SEC must file its position on additional discovery not later than April 15, 2022. The date for the filing of the joint proposed scheduling is April 22, 2022.

Fair notice defense

Some legal experts think the summary judgment will likely focus on the fair notice defence, the fourth affirmative defence. The court’s denial of the SEC’s motion to strike out that defence seems to favour Ripple and its co-defendants. In her previous court order, Judge Analisa Torres pointed out what critical factors may weigh in a future summary judgment on the fair notice defence.

Ripple said XRP was not sold as an investment and the company did not have any relationship with XRP holders. The claims of the defendants in terms of fair notice could spell the difference in the case and lead to a victory. If the defendants had their way, they want the briefing schedule to start by mid-May. SEC, however, said it was premature. Hence, the joint proposed scheduling order this month.

Delaying tactics?

John Deaton, a lawyer for 65,000 XRP holders, asks, “Why is the SEC making such efforts and dragging this issue for so long?” As of this writing, XRP is up 4.6% year-to-date (US$0.869205), although it has struggled to hit the $1. The last time the crypto topped the threshold was November 25, 2021.

The SEC lawsuit stunts the XRP’s ascent. Still, the crypto’s market cap of US$41.74 billion is slightly higher than that of Solana and Cardano.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns and recommends Solana.

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