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Ripple Labs has good hopes of a positive conclusion in its legal fight with the U.S. Securities and Exchange Commission (SEC) after the regulator sued the crypto solutions provider in December of 2020 over the alleged sale of an unregistered security token, XRP.
In an interview on CNBC Crypto World, Ripple’s CEO Brad Garlinghouse, shared his confidence and said the Howey Test speaks in favor of his company’s defense:
“You have to remember that 99.9% of XRP trading has nothing to do with Ripple the company. So when you talk about, okay XRP is a security, I go back to something I said years ago when they started: ‘A security of what company? Who is the owner?’ I think it’s very clear there is no investment contract.
If you get past the investment contract, which I think is hard, across the Howey Test, you have to meet all three prongs, and in the case of the XRP case, you can’t meet all three prongs for sure. And so we think that the judge will see that the law is very clear, we think that the facts are clear and that this is just a gross overreach of the SEC trying to wrest control of that uncertainty that has existed.”
The Howey test is a U.S. Supreme Court case that has become guiding doctrine over the past decades as to decide what passes as a security and what not. According to Garlinghouse, the ongoing lawsuit against Ripple could compare to this W.J. Howey Co case, which created precedent. He said:
Garlinghouse thinks the lawsuit against Ripple is a “bellwether case” that could compare to the SEC v. W.J. Howey Co. case, which is credited with the creation of the Howey test.
“I think the ‘Ripple Test’ may be what we look at in the future. There are a lot of facts and circumstances that can be unique, but for Ripple, and what the SEC is trying to do, I do think it’s just the SEC trying to overreach the statute.”
Ripple and the SEC recently filed motions for a summary judgment, if accepted, Judge Analise Torres of the Southern District of New York could soon be making a swift ruling, based on the accompanying documents.