Ripple Releases Official Response to SEC Lawsuit for Illegal Selling of XRP Tokens

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Ripple Releases Official Response to SEC Lawsuit for Illegal Selling of XRP Tokens

Next month is scheduled the first preliminary hearing in the SEC’s lawsuit against Ripple Labs.

The US administration accuses Ripple of illegally selling XRP tokens for the sum of $1.3 billion and considers the XRP token to be a share of the Ripple company.

Faced with these accusations, Ripple released its official response to the SEC accusations in preparation for this trial.

One of Ripple’s attorneys, Stuart Alderoty, summarized and motivated their arguments against the SEC charges.

In particular, Ripple is asking the SEC to explain why Ethereum cryptocurrency (ETH) was first seen as a security and then recognized as a commodity.
And why this rule would not apply to the XRP token.


Ripple’s lawyer highlights 7 key points in the response to the SEC:

  1. XRP is a virtual currency and thus, outside the SEC’s jurisdiction.
  2. Ripple has never entered a contract for an investment with any holders of XRP.
  3. Ripple never held an ICO, never offered future tokens to raise money and has no relationship with the vast majority of XRP holders.
  4. Holding XRP does not mean a person receives a portion of Ripple’s revenue or profits.
  5. Ripple’s XRP sales amounted to far less than 1% of the massive XRP market that has grown over the last 8 years.
  6. The XRP Ledger, on which XRP actually moves, is completely decentralized. The SEC ignores the economic reality of an XRP transaction.
  7. Ripple’s XRP holdings do not create an investment contract any more than DeBeers holdings convert diamonds into securities.

Ripple’s lawyers see the US government agency as simply “out of step nationally and globally.”
Abroad, the XRP token is in fact considered a token serving as a means of exchange or payment and not a share of the Ripple company.

Trump administration singled out

The response from Ripple’s lawyers, in particular, accuses the Trump administration of being behind the SEC’s unfounded accusations:

“Before this case, no securities regulator in the world has claimed that transactions in XRP must also be registered as securities, and correctly so.

The functionality and liquidity of XRP are wholly incompatible with securities regulation. Requiring XRP’s registration as a security would impair its main utility.

In fact, regulators in the US government (the Department of Justice and FinCEN) determined in 2015 and 2020 that XRP is a virtual currency and have since regulated it as such.

Basically, on its way out, the Trump administration sought to undo the determination that XRP was a virtual currency made during the Obama administration.”

Finally, Ripple also highlights the fact that the Ripple token is much more environmentally friendly than Bitcoin BTC and ETH, because it avoids the mining process.

On reading Ripple’s response, the company provides some relevant material that the SEC will need to respond to before the judge at the first preliminary hearing in February 2021.

The Trump administration could clearly be one of the main reasons for Ripple’s legal worries.
The Trump administration had indeed promised actions against the cryptocurrency sector, Donald Trump has always positioned himself as hostile to Bitcoin and cryptocurrencies which he considers more as tools for criminal activities.

The arrival of Joe Biden and his new administration could therefore be a game-changer, as the SEC will have a new team that Ripple has said they look forward to working with.

The Ripple XRP price is still at its lowest around 0.28 dollar.