You may have noticed that Ripple Labs has been embroiled in a fierce legal battle with the US Securities and Exchange Commission for years. This week Coindesk published a column by Preston Byrne, who makes it clear that he expects a loss for Ripple. Ripple Labs lawyer Stuart Alderoty is not pleased.
What is going on?
According to Byrne, Ripple Labs’ arguments are invalid. “Ripple says there was no investment contract between Ripple and XRP buyers and the tokens were sold for consumer use,” Byrne said. The columnist claims that this is not correct and that the tokens were indeed sold based on the agreement that Ripple Labs would work on applications for the token that could theoretically make it more valuable.
That would result in an investment contract, creating a security (effect) for US law. This means that Ripple Labs’ XRP token functions as a kind of share and as a company you cannot just sell it. Should it indeed turn out that the XRP token is an effect for US law, Ripple Labs can expect fines and the token will probably disappear immediately from the exchange platforms.
Alderoty strikes back
Stuart Alderoty, Ripple Labs’ lawyer, is not happy with Byrne’s statements. According to the lawyer, it is important that people first understand his party’s arguments before they try to undermine them. In Ripple Labs’ latest official response to the legal battle against the SEC, the company also shows that their defense does not rely on Byrne’s argument above.
According to Alderoty, Ripple Labs does not claim at all that the token was only sold for consumer use. The lawyer himself summarizes it as follows. As far as Alderoty is concerned, there is no investment contract between Ripple Labs and XRP holders. Further, in Alderoty’s view, the SEC cannot prove any part of the Howey Test. The Howey Test is a test to determine whether a financial object qualifies as a security.