Ripple’s clients use its cryptocurrency known as XRP, which the SEC considers as an investment contract. Therefore, the cryptocurrency is required to register it before conducting an initial coin offering (ICO).
Litigation to continue
Garlinghouse’s statement on Monday is a similar tactic that messaging platform Kik used in 2019 when the SEC announced an enforcement action against it. The SEC sued Kik over its $100 million unregistered ICO. Kik eventually settled that case.
The future of cryptocurrency is still undefined. The SEC wants to regulate cryptocurrencies like securities and the Treasury Department claims it is a currency.
Crypto developers and CEOs are trying to determine broader industry standards and talking about upcoming regulatory actions. In November, Coinbase CEO Brian Armstrong previewed potential U.S. Treasury Department rulemaking. And just a few weeks before that FinCEN published a proposal for rulemaking.
Attorney Michael Kellogg, of Kellogg, Hansen, Todd, Figel & Frederick, outside counsel for Ripple said, “This complaint is wrong as a matter of law. Other major branches of the U.S. government, including the Justice Department and the Treasury Department’s FinCen, have already determined that XRP is a currency. Transactions in XRP thus fall outside the scope of the federal securities laws. This is not the first time the SEC has tried to go beyond its statutory authority. The courts have corrected it before and will do so again.”
