Ripple Introduces New Role for XRP Holders as SEC Declines Clarity on Secondary Market
Ripple’s lawyers are offering John Deaton and XRP holders a new way to participate in a lawsuit against the SEC if the intervention is rejected. The Securities and Exchange Commission’s response letter regarding the preliminary intervention proposal does not indicate that it intends to provide clarity for the XRP secondary market.
Mortal Kombat XRP is in Full Swing
After last week, attorney John E. Deaton has made a new attempt to intervene on behalf of more than 10,000 XRP holders, with the US Securities and Exchange Commission (SEC) and Ripple responding yesterday. As Deaton stated via Twitter, he has not spoken to Ripple or its lawyers about this.
However, Ripple’s lawyers “sent a message in their response” to Deaton and all XRP holders, suggesting “that perhaps everyone has a role to play, even in this intervention.” Ripple’s lawyers argue that their position depends on the SEC’s reaction.
To the extent that the SEC seeks only to determine “the manner in which the defendants sold XRP determines whether their sales were an investment contract, and that the SEC will not seek to determine whether the XRP transactions violated the Securities Act or the Secondary Market Stock Exchange Act, then the need for users to participate in this matter may be limited.”
Moreover, Ripple points to the SEC’s ambiguity: “Recently, Judge Netburn correctly identified the same ambiguity, and asked the SEC whether its position in this case is that every person in the world selling XRP is committing a Section 5 violation. So with the offer of intervention, the SEC now has a chance to confirm that its lawsuit is not intended to impact the secondary XRP market in the United States.
However, Ripple’s lawyers also say that if the SEC continues to be ambiguous and refuses to clearly state its position on these issues, the intervening parties ‘ interest in the outcome of this trial may be different.
But the defendants are currently taking no position on whether the intervention-or any other, more limited rights of fate, such as” elevated amicus status “ — is appropriate.
As Deaton explained via Twitter, Ripple summarizes a couple of cases in which the court offered “elevated amicus status” after rejecting a request for intervention.
This would allow XRP users to “ assist the court and offer ideas by filling out memos and presenting arguments that answer questions submitted by the parties.” As stated by the supporters of the crypt themselves, if they can not change the opinion of the regulator, then they hope the judge will allow them to participate in this way.
SEC maintains an ambiguous stance
Predictably, the SEC opposes Deaton’s intervention, and he now has more than 10,500 supporters. The regulator claims that Deaton does not explain what claims it intends to bring against him. Moreover, it states that the SEC is not responsible for the fact that Congress has prohibited by law the consolidation or reconciliation of claims without the consent of the SEC, and sovereign immunity prohibits claims against the SEC. This alone precludes the proposed intervention. But intervention should be refused for other reasons.
The SEC alleges that Deaton and the intermediaries seek to rely on cryptocurrency exchanges only to “resume speculative trading” of XRP, which the regulator claims is evidence that Ripple Labs “offered and sold XRP as a speculative investment.”
The Securities and Exchange Commission’s third argument is that allowing the intervention would cause an avalanche of claims and almost certainly unnecessary delays, complexities, and confusion.
In this sense, it seems that the SEC does not intend to back down from its ambiguous position and provide clarity for the XRP secondary market, so the end of this standoff is not yet in sight.