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(Kitco News) –
Ripple CEO Brad Garlinghouse said the case brought by the U.S. Securities Exchange Commission (SEC) against his company will end up costing them $200 million by the time it’s decided.
Speaking at the Dubai Fintech Summit on May 8, Garlinghouse offered a bleak assessment of the prospects for U.S. crypto firms in the current regulatory environment.
“I find it, as a U.S. company that started in the United States, as someone who’s a U.S. citizen, it’s sad,” he said. “The U.S. is getting passed, not just a little bit, but by a lot. The tough thing about this is you have a country that I think has put politics ahead of policy, and that’s not a good decision if you’re trying to invest in the economy.”
Garlinghouse said “the United States is definitely stuck” when compared with other jurisdictions that have been more welcoming of crypto firms and more proactive with digital assets legislation, pointing to the Virtual Asset Regulatory Authority (VARA) in the United Arab Emirates and the passage of Europe’s MiCA legislation as counterexamples.
“By the time it’s said and done, we will have spent 200 million dollars defending ourselves against a lawsuit which, from its very beginning, people were like, listen, this doesn’t make a lot of sense,” he said, referring to the suit which has dragged on since December 2020.
“You have video footage of the chair of the SEC as a professor at MIT saying 75 of these digital assets are commodities,” he said, referring to a video from one of Gary Gensler’s graduate lectures delivered before his appointment to the agency. “Now he says they’re all securities because he’s the head of the SEC.”
Garlinghouse had a harsh assessment of SEC chair Gensler’s motives regarding the Ripple lawsuit and the agency’s actions against other crypto firms. “He’s seeking power, and he’s putting power ahead of sound policy to grow an economy in the United States.”
He added that blockchain technologies are being invested in by entrepreneurs outside the United States, with good reason, and that he encourages them to give his country a wide berth. “If I were you, I would not start in the United States,” he said. “And I think there’s a lot of U.S.-based companies, and even U.S. public companies, that would agree with that.”
On Sept. 17, Ripple and the SEC filed two separate motions with the U.S. District Court for the Southern District of New York asking Judge Analisa Torres to make a summary judgment on the case, which is a type of judgment delivered on the basis of statements and evidence without a full trial.
Summary judgment motions are typically filed when either party does not have a contention with the facts of the case and wants to avoid a long, drawn-out process.
The SEC lawsuit against Ripple alleges that its sale of XRP, which is the native token of Ripple Labs’ XRP Ledger, constitutes an offering of unregistered securities.
In the filing by the SEC, the securities watchdog asserted that Ripple does not deny that they offered and sold XRP for “money,” which meets the “investment of money” element of the Howey test and thus should be considered as the sale of a security.
In its counter-filing, Ripple argued that it “had and has no contract at all with many XRP recipients and was not even involved with most XRP trading in the secondary market.”
Ripple has also argued that the SEC has no jurisdiction over XRP since the token was sold on overseas exchanges, and also contends that XRP is not a security under the Howey test as its transfer does not involve an investment contract.
“When asked in discovery, the SEC refused to identify a contractual basis for a single offer and sale of XRP. Thus, because the Securities Act’s definition of an ‘investment contract’ requires an underlying contract, the SEC has no case to take to trial,” Ripple wrote in its motion.
The case is of great interest to cryptocurrency proponents as its outcome could dictate how the SEC classifies crypto assets moving forward. The regulator currently considers most crypto assets to be securities that must be registered under securities law. Garlinghouse said he is expecting a decision from the judge sometime in the next three to six months.
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