SEC’s Lawsuit Against Ripple Prevented Altcoins from “Security” Label, Says Bill Morgan
Bill Morgan is a solicitor and legal experts with specialization in virtual currency law. He recently talked about the outcome of Ripple and SEC lawsuit. For context it is worth noting that Securities and Exchange Commission brought a lawsuit against Ripple for dealing in unregistered securities.
The case was concluded by District Judge Analisa Torres at the Southern District of New York in July this year. The ruling went in favor of Ripple Labs with the conviction that XRP sales taking place on secondary exchanges does not constituted as unregistered securities.
At the same time, Judge also granted a partial win to SEC by asserting that commercial sales of XRP shall be recounted as unregistered securities. The case was in procession since 2020 and led to celebration among the Ripple Labs community members.
Furthermore, the summary judgement also discharged the allegations against Ripple Labs executives namely Chris Larson and Brad Garlinghouse for aiding and abetting the violation of Securities Act of 1933.
Ripple Still Faces Regulatory Challenges
Lawyer Morgan has maintained that Ripple Labs and SEC lawsuit has set a standard for the virtual currencies to not be classified as securities. The presiding judge on the case stated that the sales of XRP at secondary exchanges did not fulfill the requirements of Howey Test to qualify as an investment contract.
Additionally, she also retained that XRP sales were not directly linked to Ripple. It is important to note that at present, SEC is prosecuting various cryptocurrency projects and entities for violating securities laws.
Some of these firms have quoted the Ripple Labs case as reference to establish in the court that token sales on exchanges are not defined as unregistered securities sales. Meanwhile, SEC is now pursuing legal action against NFT projects such as Stoner Cats 2 for partaking in unregistered securities sales.
These NFTs were sold to raise funds for an animated web series. The project raised $8 million during ICO in 2021. Prosecution argued in the court that SC2 adverts mentioned resale value for investors.
Meanwhile, the company got 2.5% royalty on all secondary market transactions leading to $20 million raised from 10,000 transactions. The company agreed to pay $1 million in penalty.
Impact of Ripple Lawsuit on the Crypto Sector
Bill Morgan has claimed that the SC2 settlement falls out of the legal precedent. He claimed that such cases have increased the influence of SEC over the cryptocurrency sector. At the same time, he stated the importance of Ripple Labs lawsuit outcome.
He also claimed that if Ripple has lost the battle against SEC, every altcoin would have been classified as a security. He also shared some important observations about the ongoing lawsuit since SEC had been planning to appeal the ruling.
Morgan opines that the use and sales process for XRP has remained ambiguous on account of SEC planning to appeal the case. He pointed out that the liquidity hub for Ripple supports cryptocurrencies like Bitcoin, USDC, USDT, and Ethereum but does not extend to XRP.
He asserted that Ripple’s prime objective is to safeguard interests of its shareholders and clients. On this account, he concluded that Ripple Labs is not legally tied to XRP which warrants that it is not a security.
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