As the seat gets hotter for Ripple Labs in its case with the Securities Exchange Commission (SEC) and its cryptocurrency XRP continues to lose value and get delisted from exchanges, the remittance network has refused to back down and seems to be on the mission to shake up the rest of the crypto industry. Following the initial press released by SEC on 22nd December 2020 detailing its complaint and several filings, Ripple Labs filed its response to SEC’s complaint on 29th January maintaining its argument that XRP is not a security and not within the jurisdiction of SEC.
Interestingly this filing also includes a Freedom of Information Act (FOIA) request targeting information on Ethereum. By way of this FOIA, Ripple Labs is seeking disclosure of “All communications with the Ethereum Foundation and/or other relevant companies (including, but not limited to, ConsenSys) or individuals in the ether ecosystem (including but not limited to, Vitalik Buterin, Anthony Di Iorio, Charles Hoskinson, Mihai Alisie, Amir Chetrit, Joseph Lubin, Gavin Wood, and Jeffrey Wilcke), or any attorneys or other individuals representing the Ethereum Foundation or other relevant companies or individuals in the ether ecosystem, and all documents, including internal communications, analyses, and other materials, that were prepared or relied upon by Director Hinman, or any other current or former Division Director, Staff, or Commissioner in reaching the determination that ether is not a security, including drafts of Director Hinman’s statements regarding ether and analyses prepared by SEC staff.” In the filing, Ripple is also leaning heavily on claims that Bitcoin and Ether are both controlled by China-based mining pools.
This FOIA is attacking the position of Ethereum and its very existence. This is coming even after the SEC has clarified the position of Ether as not being a security. According to SEC, although the presale of Ether may have seemed to be a securities offering at the time, due to Ethereum’s sufficient decentralization, Ether qualifies as a commodity and thus, Ether is under the jurisdiction of the Commodity Futures Trading Commission.
According to a representative from Ripple, “The SEC has clearly picked two winners and ignored a growing and robust industry that is much larger than Bitcoin and Ether. In addition to discovery we will seek directly in the lawsuit, we filed a Freedom of Information Act (FOIA) request for more information about how the SEC determined the status of Ether as a non-security.”
A lot of confusion has revolved around the classification of initial coin offerings (ICO) and whether or not they qualify as security offerings or not. Ripple Labs, therefore, is seeking to understand why its ICO is being classified as a securities offering and under scrutiny today whereas Ethereum’s is not. Given the time frame it took for SEC to give a position on cryptocurrencies in its DAO Report, we can expect a lot of records to be pulled up and presented if the filing is approved. The issue of timing should also be considered as this report was published after the establishment of Ether.
This case has been pending for a while as SEC has been on the neck of Ripple Labs. A major attraction for SEC officials is that Ripple executives control the bulk of the XRP market, unlike the Ethereum Foundation. Recently there was news of Jed McCaleb, Ripple co-founder, and former CTO selling over $400 million worth of XRP in 2020.
Although this filing may not have any effect on the opinion of SEC on Ethereum, it is highly likely to help with Ripple Labs’ defence if they are able to raise questions on the legitimacy of the decision.
What do you think? Should XRP qualify as a security or as a commodity?
Let us hear your take in the comment section below.