The official response denies all allegations of unregistered securities sales, claiming that XRP is a virtual currency and not a security.
The summary published on January 29th by Ripple’s Lead Counsel Stuart Alderoty includes a list of reasons why their lawyers disagree with the SEC’s findings.
Ripple claims that they are not being sued for fraud or misrepresentation, and that XRP is not an investment contract for a number of reasons including:
1. XRP is a virtual currency and thus, outside the SEC’s jurisdiction.
2. Ripple has never entered a contract for an investment with any holders of XRP.
3. Ripple never held an ICO, never offered future tokens to raise money and has no relationship with the vast majority of XRP holders.
4. Holding XRP does not mean a person receives a portion of Ripple’s revenue or profits.
5. Ripple’s XRP sales amounted to far less than 1% of the massive XRP market that has grown over the last 8 years.
6. The XRP Ledger, on which XRP actually moves, is completely decentralized. The SEC ignores the economic reality of an XRP transaction.
7. Ripple’s XRP holdings do not create an investment contract any more than DeBeers holdings convert diamonds into securities.
Ripple says that the primary question the lawsuit is asking is whether or not XRP is a security. If this fails to hold up to scrutiny the case will fail.
The response claims that the SEC is ‘out of step’ with global and domestic regulators who have previously determined that XRP is in fact not a security but a virtual currency or crypto asset. The SEC is asking the judge to ‘contradict’ the findings of other regulators in the US and worldwide.
Ripple says that the SEC is picking winners and losers because they are allowing BTC and ETH to non-securities, even though at one point the SEC says ETH was a security and then evolved into a non-security. Ripple has filed a Freedom of Information Act request seeking more information about how this determination was made.
Finally, Ripple alleges that the SEC ‘distorted the facts’ of the case by cherry picking quotes taken out of context, and drawing conclusions which are unsupported by both the facts and the law.
Outside counsel for Ripple made this evaluation of the case:
“The SEC’s case is unprecedented and ill-conceived. The SEC has ignored XRP’s clear status as a virtual currency, contradicting not only the findings of other U.S. regulatory agencies, but also international regulatory regimes. Over the last eight years, the XRP market, independent of Ripple’s activities, had grown to a massive scale- trading on over 200 exchanges worldwide. The SEC is now stretching the concept of an “investment contract” beyond its breaking point. We look forward to presenting our case in Court.” Andrew Ceresney, Debevoise & Plimpton
The first hearing for the case is schedule on February 22nd. Cases like this can take many years but Ripple’s lawyers have stated they will try to reach a resolution as soon as possible to protect XRP investors.