The Blockchain Association supports Ripple’s efforts against the SEC

by Arthur · October 29, 2022

Blockchain Association archived an amicus brief in the case between the US Securities and Exchange Commission (SEC) against the payment company Ripple. The proposal is a tool a party uses to provide the court with additional information to support the defendant, in this case the payment company.

In late 2020, the commission sued Ripple for the alleged offering of an unregistered security, XRP. The case has been crucial in defining the regulator’s stance on the crypto industry. The result may affect the sector and related companies in the years to come.

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Ripple and allies are fighting back against the SEC

In that sense, the Blockchain Association decided to take a stand against the SEC and its administration led by Chairman Gary Gensler. The organization’s press release classified the commission’s action as contrary to US law. The release said the regulator is trying to regulate by “enforcement” rather than guidance.

The former approach is perceived as hostile to companies like Ripple and many other crypto companies facing investigation or legal action by the regulator. Kristin Smith, executive director of the Blockchain Association, called the SEC’s interpretation of current US securities laws “accidental.”

Smith believes the commission is pushing to implement an outdated interpretation of securities legislation in a modern and innovative sector. As a result, Ripple and others are penalized. Smith added:

This is exactly the case with Ripple, which the SEC targeted nearly two years ago in an enforcement action that alleged the crypto company had not registered a digital token as a security. The SEC must follow the law, they cannot impose their draconian view on the entire crypto ecosystem through an enforcement.

Moreover, Smith argued that Ripple’s fight against them is an opportunity to push back against the regulator’s “agenda”. In addition, the case may allow for the modernization of securities legislation in the United States.

Once a security, always a security?

Jake Chervinsky, head of policy for the Blockchain Association, emphasized the organization’s position against the SEC. The regulator is “hurting” crypto companies and investors in these projects, Chervinsky said.

In the case between Ripple and the SEC, the payment company presented evidence of its efforts to cooperate with the regulator. The company sought advice and guidance from the commission as early as 2014 when it was working on RippleNet.

However, the commission reportedly ignored their request and failed to classify XRP and any Ripple-related project as a security. In that sense, Chervinsky said the Gensler-led regulator assumes its rules are clear to all players.

Those who do not meet their standards are dragged into a legal battle. The head of policy for the Blockchain Association called this behavior “regulation by enforcement.” Chervinsky added:

The SEC’s views are wrong as a matter of law and policy (…). The fatal flaw in the SEC’s position is its inability to distinguish primary sales from downstream transactions in the secondary market (…). The fatal flaw in the SEC’s position is its failure to distinguish primary sales from downstream transactions in the secondary market.