In the latest filing, the SEC (Securities-and-Exchange-Commission) of the United States contradicted with the request of Ripple as well as Chris Larsen (the co-founder thereof) to respond to the cross-examinations regarding the Howay-test’s applicability for deciding about XRP’s status. More recently, the request of Ripple has been opposed by the SEC for revealing the crypto holdings of its employees for generating the documentation related to the department’s “trading-preclearance-decisions”.
The Disputed Howey test
In August this year Ripple requested the court for a motion to force the securities department to face the company’s interrogatories. The company took this step after receiving ambiguous and vague answers from the regulator relating to the applicability of the Howey test for the XRP transactions. While responding, the department filed its denial to answer to the interrogatories of Ripple highlighting the Howey test’s virtual application on the entire of the defendants’ XRP transactions during the recent 8 years. An ex-prosecutor in the Office of Attorney of the United States named James K. Filan (who worked from the side of Connecticut District) highlighted this point and also shared the respective filing through his Twitter account.
The continued case to confront Ripple was submitted in recent December on the behalf of the SEC accusing the firm’s XRP sale to be a security offering that was unregistered while acquiring up to $1.38 billion. Deciding on if as well as why the XRP transactions contained investment contracts, and securities’ registration in addition to their disclosure requirements, are essential in the lawsuit of the SEC. The securities department‘s plan to find out the characteristics of security comprises of the previously mentioned Howey test which states that in the case of the money investment via a traditional enterprise where there is a significant expectation that the profits would be resultant of the others’ efforts, an investment-contract is present.
SEC’s point of view for not providing additional explanation
The defendants held on till the completion of fact discovery for up to seven weeks following the initial interrogatory responses from the securities department. Then they informed that the responses given by the SEC were deficient and thus made a complaint to the agency while the SEC opposed the request to provide more clarification. In a letter which was submitted by the agency to Sarah Netburn (the Magistrate Judge of the United States) on 8th September, it was noted that the regulator had adequately answered the questions raised by Ripple. It further stated that the department is not bound to comply with any way that seems suitable to the wrong interpretation of the legal code by the defendants.