A legal battle between the U.S. Securities and Exchange Commission (SEC) and Ripple, a blockchain technology and currency exchange network and creator of XRP, could ultimately change the way cryptocurrency is regulated for the future.
In the latest development in the ongoing conflict, U.S. District Judge Analisa Tores ordered sensitive documents about the case to be unsealed by February 17, Protocall.com reports.
At the heart of the lawsuit is whether the cryptocurrency XRP, a creation of Ripple, is a form of digital currency or a security, according to Reuters. The SEC believes that XRP is a security and should be governed by its securities laws. Ripple asserts that XRP is not a security but is simply a cryptocurrency used to facilitate payments and money transfers.
Stephanie Avakian, director of the SEC’s Enforcement Division, explained, “We allege that Ripple, Larsen, and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system.”
Ripple had previously sought to keep the documents in the docket sealed, stating that they “reflect the proprietary internal business strategies, analyses, impressions, and concerns of a private company and its founder,” according to a filing by Ripple’s legal counsel Martin Flumenbaum.
The documents that will be unsealed contain information regarding legal counsel provided to Ripple by an unnamed legal firm before Ripple’s launch. According to Reuters, the SEC claims the documents will prove that the company had been warned that XRP could fall under the category of security.
Ripple’s general counsel, Stuart Alderoty, says the documents prove the opposite. “Once released, these documents will show that in 2012, Ripple received a legal analysis that XRP was not an investment contract,” said Alderoty. “The fact that it took the SEC eight years to suggest they disagreed with that analysis – while XRP traded in a massive global market – is baffling.”
