Blockchain Association throws support behind Ripple in SEC duel
US-based crypto advocacy group Blockchain Association has come out in support of Ripple Labs amid its ongoing legal battle with the Securities and Exchange Commission (SEC), arguing that the case could be very important to the future of the crypto industry.
In an October 28 post, the advocacy group announced that it will “stand” with the US crypto economy by filing an amicus brief, also known as a “friend of the court” in the SEC’s enforcement action against Ripple.
Almost two years ago, the SEC announced that it was suing Ripple (XRP), former CEO Christian Larsen and current CEO Brad Garlinghouse in December 2020 for allegedly raising $1.3 billion through unregistered securities sales through XRP.
“This case, which is just one in a long line of SEC efforts to regulate by enforcement, highlights the SEC’s efforts to cement and legitimize its overly broad interpretation of the Howey test,” the association wrote.
The Howey test determines what qualifies as an investment contract and is therefore what is subject to US securities laws.
In their brief, the Blockchain Association outlined why the SEC and Chairman Gary Gensler’s approach to securities law could, in their view, have “devastating effects” on the crypto industry.
They argue that blockchain technologies have many uses across the crypto industry; tokens can be used to pay for goods and services, conveyance of intellectual property rights, inventory tracking and for a specific purpose in a given blockchain project.
“Applying the securities laws to these tokens — whether through the prism of the Howey test or not — will significantly limit these networks from functioning.”
The association also claims that the SEC is ignoring clear Supreme Court and Second Circuit precedents that say onboard transactions are outside the SEC’s jurisdictional reach.
“While the blockchain industry is global in nature, the federal securities laws are not. The Second Circuit has repeatedly emphasized the Supreme Court’s lesson on this subject.”
“Therefore, both for liability and (if necessary) damages purposes, this court should be mindful of the limits of the Securities Act,” it added.
Related: Ripple CEO hints when SEC case will end as Hoskinson hits back at XRP army
Kristin Smith, executive director of the Blockchain Association, believes this case could have far-reaching consequences for the future of crypto, calling the SEC’s interpretations of the securities laws, “the biggest threat to the future of this fast-growing industry.”
“By erratically applying these outdated standards to a modern and innovative technology, the SEC continues its ‘regulation by enforcement’ pattern, penalizing crypto companies with little justification or warning,” she said.
The Blockchain Association said the case gives the industry the chance to push back against what it sees as “the SEC’s regulatory by enforcement agenda” and potentially open the door to modernized standards for the industry.