At present, fintech firm Ripple is already subject to several lawsuits that allege it broke SEC rules by selling unregistered securities with sales of the XRP crypto token.
But in a further blow, attorneys for a company called Bitcoin Manipulation Abatement LLC filed a fresh lawsuit with the US Federal District Court on May, 1st 2020.
Consequently, according to court documents, Bitcoin Manipulation Abatement LLC accuses Ripple and its CEO, Brad Garlinghouse of offering and selling unregistered securities.
Lack of Regularity Clarity Represents Stickpoint For Ripple
The US lacks a uniform legal framework with regard to digital assets. This lack of decisiveness is working to drive tech innovation away from US shores.
With that, authorities are well aware that the outcome of Ripple’s on-going lawsuits could worsen this situation further. The knock-on effects potentially being the US losing ground to crypto-friendly nations.
Caitlin Long, an ex-Managing Director at Morgan Stanley commented on the flight overseas as a direct result of the SEC’s indecision.
“The SEC’s stance has caused a massive flight of startups to offshore jurisdictions… Lawyers right and left were telling clients, ‘Don’t issue tokens to U.S. investors and don’t domicile in the U.S.'”
But is it already too late? Facebook’s Libra Foundation raised many eyebrows last year when it announced it was setting up base in Geneva, Switzerland.
However, David Marcus, Head of Libra was quick to point out that this wasn’t to evade US regulators. Instead, Marcus stated that a number of influential organizations are already headquartered in Switzerland. Making the move a better fit for the company focused on crypto.
“We chose Switzerland not to evade any responsibilities or oversight, but rather because it’s a well-established financial place where the World Trade Organization, Bank for Internal Settlements and other financial institutions are located.”
All the same, it’s hard to argue that the US hasn’t already lost ground. Switzerland announced in February 2018 that some ICOs are not securities. This effectively declared Switzerland as a top contender for conducting crypto business.
More than two years later, the SEC continues to procrastinate on a securities framework in respect of crypto. As a result, Ripple must feel hard done by.
New Bill Does Not Consider Digital Asset as Securities
Based on current circumstances, it seems as though the SEC is waiting on the court system to rule on whether the XRP crypto token is a security, or not.
It could be argued that such a decision falls within the remit of the SEC, not the US court system.
However, news of a bill amendment update to Californian securities law may mean Ripple gets a reprieve from the on-going lawsuits.
The state of California, home to Silicon Valley, is moving to clarify what is meant by a security. The bill amendment excludes digital assets from the definition of a security.
“Investment contract, except any digital asset that meets one of the following criteria is presumptively not an investment contract.”
If passed, this bill amendment would effectively nullify accusations that Ripple acted against securities regulation by selling XRP.
Featured image from Unsplash
