You may have noticed that Ripple Labs has been embroiled in a lengthy lawsuit with the Securities and Exchange Commission (SEC) for years. The subject of the case is whether Ripple Labs’ XRP token qualifies as a security. If so, Ripple Labs has made an illegal securities offering, according to the SEC.
The SEC attack
In a new 62-page document for the lawsuit, the SEC once again pleads that the XRP token should never have entered the market this way. According to the SEC, there is an “investment contract” between Ripple Labs and investors who bought XRP. To substantiate this, it gives three facts that, according to the SEC, prove it.
First, Ripple Labs and its executives do not deny that it received $2 billion in investment from investors in exchange for the XRP token. In addition, Ripple Labs’ defense does not deny that there is a joint venture.
“Ripple did not manage investor funds separately, but pooled them together and promised investors to use the funds to find applications and value for XRP,” the SEC said. According to the SEC, this is sufficient evidence that it concerns a company that tried to create value for the XRP token on behalf of its investors.
Profit forecast
Finally, the Ripple Labs defense also did not deny that there was a certain profit expectation attached to the tokens. “Ripple Labs made it clear several times that they were doing their best to increase the value of the XRP token,” the SEC’s latest argument reads. All in all, according to the financial regulator, this means that the XRP token is a security and that it should not have just appeared on the market.
If the SEC is proven right by the court, this could have major consequences for Ripple Labs and the XRP token, but also for other projects. This would mean that many other projects await the same fate. You could say the same about Ethereum, for example.
If XRP, Ethereum, and other tokens qualify as securities under US law, these tokens could soon disappear from exchange platforms. Without the necessary licenses, it is not allowed to trade securities on a stock exchange platform.