Brad Garlinghouse, CEO of Ripple Labs, says a judge, not a jury, will ultimately decide the “cryptocurrency trial of the century”.
In an interview with Fox Business Thursday, Garlinghouse, whose company has been embroiled in a widely publicized legal battle with the Securities and Exchange Commission for nearly two years, said he expected the case won’t go to trial because he believes the judge has enough evidence to rule from the bench.
Last weekend, both sides filed summary motions in the Southern District of New York, asking District Judge Analisa Torres to rule on the facts presented in their respective briefs. The decision is now up to Torres to rule in favor of one of the parties or to refer the case to trial.
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But Garlinghouse is confident the latter will not occur because the facts of the case are not up for debate. Judges often refer cases to juries when there is a disagreement on the facts. This is different. Both sides agree that the Court can decide on the case because what is primarily at stake is the application of the law, not a dispute over the facts.
There is no question that Ripple has sold XRP over the years and there is no doubt that Ripple’s customers are using XRP to facilitate cross-border payments on the Ripple platform. The disagreement concerns whether XRP is a special type of security known as an investment contract that falls under the jurisdiction of the SEC. Ripple claims that it has never entered into any investment contract with any buyer of XRP. The SEC argues that Ripple’s XRP sales should have been registered with the SEC based on court records.
“Trials and juries really serve to determine if there is uncertainty about the facts,” he said in an interview with Claman Countdown. “The facts are not up for discussion here. The law is up for debate.”
Attorneys close to the case tell FOX Business that Judge Torres likely won’t make a decision on summary motions until next year.
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The latest filing of summary motions could mark a crucial milestone in the case that has dragged on for nearly two years. In December 2020, the SEC sued Ripple and its two CEOs, Brad Garlinghouse and Chris Larsen, for failing to register XRP with the commission, thus putting the tokens in violation of federal securities laws.
The price of XRP dropped dramatically when the cause was announced, and despite a rally during the 2021 bull run and a recent spike, traders are of the opinion that the price remains suppressed by the cause.
The SEC continues to argue that because Ripple used XRP sales profits to build its platform, buyers of the XRP token were relying on Ripple’s efforts to make a profit, thus fulfilling a key requirement of the so-called Howey Test.
That 1946 Supreme Court case is the precedent that determines whether an investment is a security and falls under the supervision of the SEC or whether it is a commodity like Bitcoin and therefore does not require SEC registration. The Commission further argues that by purchasing the token, XRP investors entered into an investment agreement with Ripple, similar to buying shares, fulfilling another Howey Test requirement.
Ripple claims that it has done nothing wrong and that XRP’s secondary market sales are unaffected by the company and that there has never been any investment agreement between it and the holders of the crypto token. Ripple’s legal team has expressed its belief that the SEC, especially its chairman Gary Gensler, is trying to override its authority by assuming that all cryptocurrencies are securities.
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“The SEC has lost its way,” Garlinghouse said. Congress empowers the SEC, the SEC can’t just take power.
Once resolved, the case could have far-reaching implications for the cryptocurrency industry. A Ripple victory could mean the SEC and Gensler could be forced to take a more measured approach to regulation, possibly by ceding some of its regulatory jurisdiction to the Commodities Futures Trading Commission, which provides frontline oversight of non-stocks such as commodities. .
A SEC victory could see the agency expand its cryptocurrency regulation far beyond XRP; some industry insiders say the SEC could initiate a similar case against Ether, the native token of the Ethereum blockchain and the second most valuable cryptocurrency after Bitcoin. The Ethereum platform was partially funded by the sale of unregistered tokens, known as the initial coin offering, in 2014.
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Since taking office, Gensler has greatly avoided questions about whether he believes Ether is a security despite the token being deemed free from SEC oversight under former SEC Chairman Jay Clayton. Earlier this month, Gensler reported that he would back the CFTC with regulation on Bitcoin, which he believes is likely a commodity.