By John E. Deaton, Founder and Host of CryptoLaw.
Five months ago, almost to the day, the U.S. Securities and Exchange Commission filed a lawsuit against Ripple but made it clear it was coming after everyone connected to XRP. They ignored warnings that this lawsuit would cause serious harm to countless people. There was never one phrase in the mountain of pages the SEC has filed since December 22, 2020 that showed one bit of consideration for the retail investors they are supposed to be defending by their every enforcement action. When we asked the court to hear our voice, the SEC scoffed and insulted us in their formal response, saying that all of us who suffered collateral damage from their ill-conceived lawsuit should remain silent.
Today, we answered them.
I have just filed our Motion to Intervene in the case of SEC v. Ripple, on behalf of an entire community of XRP holders, users, developers, content providers and the many small businesses that utilize the digital asset XRP as well as the XRP Ledger. In short, I made it clear to the court that without our intervention, we are without a voice in a debate of great stakes for us and the holders of all digital assets in the United States.
When the SEC brought this lawsuit against Ripple and its two executives, it not only claimed that Ripple and its executives conducted an unprecedented eight-year continuous and ongoing coin offering, it also specifically alleged XRP itself to be an unregistered security and all of us who have traded it since 2013 have been engaged in unlawful trades.
This troubling claim is not disguised or otherwise difficult to find. In the first paragraph of their complaint, the SEC labels XRP itself as a “digital asset security.” The SEC claims that “from 2013 through the present, Defendants sold over 14.6 billion units of a digital asset security called XRP.” The SEC is alleging that any sale or transfer of XRP by any entity, business or individual is a violation of Section 5 of the Securities Act. They also go further in saying that XRP has “no utility” other than as an investment contract in Ripple, despite the fact that a massive community of XRP users and developers has existed for years completely apart from that company. Indeed, a huge segment of XRP holders had never heard of Ripple when the SEC accused them of having entered into a “common enterprise” with Ripple. The absurdity and arrogance of this unrestrained, out-of-control regulator’s claims could not be further from the truth. Their logic could only be sustained if the SEC was able to suppress any XRP retail holder from speaking up and telling our stories of how we use this digital currency in a variety of ways.
It should give all cryptocurrency holders and developers faith that the U.S. District Court for the Southern District of New York does not appear to be buying what the SEC is trying to sell in this case. It has taken on the SEC’s lawyer over XRP’s utility as well as his preposterous argument that all sales of XRP are unregistered securities trades. Best of all, the court has invited us to argue why we retail holders – those the SEC is supposed to be protecting – should intervene in the case.
For more than eight years, the SEC allowed XRP, the XRP ledger, and their associated technologies evolve from a promising digital asset with superior functionality into the third-largest digital currency in the world. The XRP of 2021 is very different than that of 2013. For these reasons, it is clear that those of us who hold and use XRP have a right to intervene in this case in order to adequately our interests. The very interests the SEC decided to dismiss when they filed their December complaint.
If the SEC is successful in its attack on Ripple and XRP, it will assume the authority to regulate and attack every other cryptocurrency in existence. The precedent set here become the new standard and no digital asset exchanges, developers, vendors, ordinary users, and retail holders of cryptocurrencies will be safe.
It is now up to the court to decide whether we can join the case. Nothing is guaranteed, and we must respect the judge’s ultimate decision. But I’m proud and honored to have the trust and support of such a dynamic and innovative community of XRP holders who refused to back down when the government raised its fist and told us to be silent.