US-based cryptocurrency advocacy group Blockchain Association has come out in support of Ripple Labs amid its ongoing legal battle with the Securities and Exchange Commission (SEC), stating that the case could be very important for the future of the cryptocurrency industry.
In a post on October 28, the advocacy group announced that it will “support” the American crypto economy by filing an amicus brief, also known as a “friend of the court,” in the SEC enforcement action against Ripple.
almost two years ago, The SEC announced that it would initiate a lawsuit against Ripple, former CEO Christian Larsen, and current CEO Brad Garlinghouse in December 2020 for allegedly raising $1.3 billion through the sale of unregistered securities via XRP (XRP).
“This casewhich is just one in a long line of efforts by the SEC to regulate through enforcement, highlights the SEC’s efforts to cement and legitimize its overly broad interpretation of the Howey test,” the association wrote.
The Howey test determines what qualifies as an investment contract and, therefore, what is subject to United States securities laws.
In his writing, The Blockchain Association outlined why it thinks the SEC and Chairman Gary Gensler’s views on securities laws could have “devastating effects” on the cryptocurrency industry.
They argue that blockchain technologies have many uses in the cryptocurrency industry.; tokens can be used to pay for goods and services, transfer of intellectual property rights, inventory tracking, and for a specific purpose in a certain blockchain project.
“Applying securities laws to those tokens — whether or not through the prism of the Howey test — would significantly restrict the operation of those networks.”
The association also states that The SEC is ignoring clear Supreme Court and Second Circuit precedents that establish that onboard transactions are outside the SEC’s jurisdictional reach:
“Although the blockchain industry is global in nature, federal securities laws are not. The Second Circuit has repeatedly reemphasized the Supreme Court’s lesson on this issue.”
“Consequently, For both liability and (where applicable) damages, this Court should take into account the limits of the securities laws.”
Kristin Smith, CEO of the Blockchain Association, believes this case could have far-reaching ramifications for the future of cryptocurrencies; calls the SEC’s interpretations of securities laws “the biggest threat to the future of this fast-growing industry.”
“By erratically applying these antiquated rules to modern, innovative technology, the SEC continues its pattern of ‘regulation by application,’ punishing crypto businesses with little justification or warning,” he said.
The Blockchain Association said that the case gives the industry an opportunity to fight back against what they see as the SEC’s “enforcement regulation agenda” and potentially open the door to modernized rules for the industry.
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