Ripple Labs CEO Brad Garlinghouse says a judge, not a jury, will ultimately decide the “cryptocurrency trial of the century.”
In an interview with Fox Business on Thursday, Garlinghouse, whose company has been embroiled in widespread litigation with the Securities and Exchange Commission for nearly two years, said he doesn’t expect the case to go to trial because he believes the judge have enough evidence to rule from the bench.
Last weekend, both parties filed summary judgment motions in the Southern District of New York, asking District Judge Analisa Torres to make a decision based on the facts set out in their respective briefs. The decision now rests with Torres to rule in favor of either party or take the case to court.
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But Garlinghouse is confident that the latter will not happen as the facts of the case are not disputed. Judges often refer cases to a jury when there is disagreement about the facts. That is different. Both sides agree that the Court can decide the case because the primary issue is the application of the law and not a dispute of fact.
There is no dispute that Ripple has sold XRP over the years, and there is no dispute that Ripple’s customers are using XRP to facilitate cross-border payments through Ripple’s 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 an investment deal with a buyer of XRP. The SEC argues that Ripple’s sales of XRP should have been registered with the SEC based on precedent.
“Trials and juries are really meant to determine if there is uncertainty about facts,” he said during an interview with the Claman Countdown. “The facts are not at issue here. The law is at issue.”
Attorneys close to the case are telling FOX Business that Judge Torres likely won’t rule on the summary judgment motions until next year.
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The recent filing of the summary judgment motions could mark a crucial milestone in the case, which has dragged on for almost 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, causing the tokens to violate federal securities laws.
The price of XRP fell dramatically when the lawsuit was announced, and despite a rally during the 2021 bull run and a recent surge, traders believe the lawsuit is still dragging down the price.
The SEC goes on to argue that buyers of the XRP token have relied on Ripple’s efforts to turn a profit as Ripple has used the profits from the sale of XRP to expand its platform, a key requirement of the so-called Howey tests passed.
This 1946 Supreme Court case is the precedent that determines whether an investment is a security and falls under SEC supervision, or whether it is a commodity like Bitcoin and therefore does not require SEC registration. The commission also claims that by buying the token, investors in XRP entered into an investment deal with Ripple, similar to buying shares, which satisfies another requirement of the Howey test.
Ripple claims to have done nothing wrong and that the sale of XRP on the secondary market is not influenced by the company and that an investment contract has never existed between it and the crypto token holders. Ripple’s legal team has been vocal about its belief that the SEC, particularly its chairman Gary Gensler, is attempting to override its authority by assuming that all cryptocurrencies constitute securities.
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“The SEC is lost,” Garlinghouse said. “Congress gives power to the SEC, the SEC can’t just take power.”
Once resolved, the case could have far-reaching implications for the crypto industry. A Ripple win could mean the SEC and Gensler could be forced to take a more measured approach to regulation, potentially ceding some of their regulatory responsibility to the Commodities Futures Trading Commission, which provides front-line oversight of non-securities like commodities.
An SEC victory could see the agency expand its regulation of crypto well beyond XRP; Some industry experts say the SEC could launch a similar case against Ether, the Ethereum blockchain’s native token and the second most valuable crypto after Bitcoin. The Ethereum platform was partially funded in 2014 through the sale of unregistered tokens known as the Initial Coin Offering.
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Since taking office, Gensler has noticeably dodged questions about whether he believes ether is a security, despite the token being considered free of SEC oversight under former SEC Chairman Jay Clayton. Earlier this month, Gensler signaled that he would support the CFTC’s regulation of Bitcoin, which he said is likely to be a commodity.