The legal battle between Ripple Labs Inc. and the U.S. Securities and Exchange Commission (SEC) has been ongoing for over three years.
Recently, a clip from a post on X by JackTheRippler (@RippleXrpie) featuring Ripple’s Chief Legal Officer (CLO) Stuart Alderoty reignited discussions about the SEC’s stance on XRP and open permissionless ledgers.
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In the clip, Alderoty emphasizes XRP’s existence on an open permissionless ledger. He cites two key pieces of evidence to support this claim: the words of Ripple’s Chief Technology Officer (CTO) David Schwartz and the SEC’s decision to establish a node on the XRP Ledger (XRPL).
Alderoty emphasized that the SEC did not seek permission from Ripple to establish its node on the XRPL and pointed out that the SEC does not need to. This development has generated mixed reactions within the XRP community.
Many interpreted it as hypocrisy, highlighting the apparent contradiction between the SEC’s lawsuit against Ripple for allegedly selling unregistered securities (XRP) and its decision to engage with the very ledger XRP runs on. This sentiment is reinforced because of rumors that the SEC might appeal the July 2023 ruling that determined that XRP itself is not a security.
The SEC’s Stance on XRP and Open Ledgers
The SEC’s lawsuit against Ripple hinges on its classification of XRP as a security. Securities are financial instruments that represent an investment contract. The Howey Test, a legal framework established by the U.S. Supreme Court, is used to determine whether an asset qualifies as a security. The test focuses on factors such as investment of money, expectation of profits, a common enterprise, and the efforts of a promoter.
The SEC alleges that Ripple raised funds through the sale of XRP, satisfying the Howey Test criteria. Ripple contends that XRP is a utility token used to facilitate transactions on the XRP Ledger, similar to how Ether (ETH) functions on the Ethereum blockchain.
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The court determined that XRP is not a security, and non-institutional sales of XRP don’t count as securities offerings. The lawsuit is currently in the remedies phase, and the SEC’s decision to establish a node on the XRP Ledger appears to contradict its stance on XRP as a security.
Some community members pointed out that the SEC has been running a node on the XRPL for years. JackTheRippler and many community members interpret the SEC’s contradictory behavior as a positive sign for XRP.
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