The US Chamber of Digital Commerce (CDC) has requested to file an amicus curiae brief in the case of the United States Securities and Exchange Commission against Ripple Labs and its executives Bradley Garlinghouse and Chris Larsen. Liliya Tessler of the Sidley Austin Law Firm filed a package of documents, including the writ, with the New York Southern District Court on September 14.
The CDC is the largest blockchain and digital asset trade group in the world, with more than 200 members that include industry players, investors, and law firms. He maintained that the Chamber does not have “an opinion on whether the offer and sale of XRP is a securities transaction”, but is interested in “ensuring that the legal framework applied to the digital assets underlying an investment contract is clear and consistent”, adding:
“Maintaining this distinction is critical to developing a predictable legal environment through technologically neutral precedent, something this Court has the power to do.”
The documents later reframe the issue as “whether the well-established law applicable to the offer and sale of an investment contract that is a securities transaction is properly distinguished from the law applicable to secondary transactions in digital assets that were previously the subject of a investment contract” in light of the fact that “no federal law (or regulation) specifically controls the legal characterization of digital assets recorded on a blockchain.”
The Chamber is wading into the Ripple v. SEC case.
Expect something similar to what it filed in the Telegram case and the argument is that although the SALE of XRP might have been as a security, the token is not inherently a security.
Similar to JDeaton, just not as compelling. https://t.co/D7m0kxKdp6
— Jeremy Hogan (@attorneyjeremy1) September 11, 2022
In the proposed amicus brief, the CDC recognizes the Howey test as “fact-intensive”, that:
“It is sometimes difficult to apply even for experienced lawyers, not to mention market participants without legal training.”
The CDC asked the court to reiterate the difference between contracts that are securities and the subjects of those contracts, which are not securities. The cases cited include a hodgepodge of issues, as is usual in these debates. In this case, cases related to whiskey barrels, public telephones, condominiums and beavers were mentioned.
The CDC continued its argument by saying that the SEC has “provided commendable guidance on the application of securities laws”, but “the SEC’s scrutiny approach, similarly based on Howey, paints a different picture” and the agency has not provided guidance to market participants who have requested it.
The CDC continues to maintain that the SEC is using a novel application of secondary transaction contract analysis with assets subject to an investment contract in its case against Ripple, but has provided no guidance on how to apply that analysis. However, the SEC continues to expect market participants to determine whether or not an asset is a security.
The CDC noted the lack of precedent regarding secondary transactions with the subjects of securities contracts, but stated:
“The Chamber considers that, as long as the underlying asset does not include financial interests, such as legal rights to debt or equity, digital assets are presumed to be commodities.”
The CDC noted that the proposed Lummis-Gillibrand Responsible Financial Innovation Act (RFIA) took the same stance by introducing the concept of “ancillary assets” into consideration. Also:
“The Chamber respectfully requests that this Court be inspired by the principles established in the RFIA to guide itself if it decides to clarify the characterization of digital assets that are the subject of an investment contract or defers such a decision to the legislator.”
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