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Ripple filed Initial Response to Securities and Exchange Commission in Federal Court
On January 29, 2021, Ripple filed its response to the Securities and Exchange Commission's complaints along with a Freedom of Information Act request.
Ripple tried to answer each of the complaints against Ripple labs inc and co-founders in its response. The claim by SEC was that Ripple labs violated the U.S. securities laws by selling XRP tokens of $1.3 billion worth. In its 93-page filing, Ripple responded to each of the SEC's paragraphs. Ripple argued that XRP is not an investment contract or security, and hence the sales of XRP are not investment contracts.
The opening statement of Ripple states:
XRP performs a number of functions that are distinct from the functions of “securities” as the law has understood that term for decades. For example, XRP functions as a medium of exchange- a virtual currency used today in international and domestic transactions- moving value between jurisdictions and facilitating transactions. It is not a security, and the SEC has no authority to regulate it as one.
Ripple's Opening Statement
Ripple even provided detailed reasons why XRP is not a security and why its sale cannot be termed as an unregistered securities offering. In the letter, there were many comparisons to BTC and ETH by Ripple that asks for clarity why these digital currencies are not securities even though there are many similarities between ripple's and Ethereum's initial offering. Ripple's response was focused on the working of XRP in the company's view, which argued that the price of XRP is correlated with that of Bitcoin (BTC) and Ethereum (ETH). Ripple also believes that the notice by SEC was not fair enough. It pointed out that the XRP is registered as a convertible virtual currency. It was allowed for sale and market transactions by the U.S. Department of Justice and the Financial Crimes Enforcement Network in 2015.
Notably, Ripple labs inc was sued by the Securities and Exchange Commission in December 2020 because XRP, worth over $1 billion, was sold by CEO Brad Garlinghouse and Chairman Chris Larsen.
Ripple also filed a Freedom of Information Act request, as being said, to know the reason behind ETH is not considered as security despite having many similarities between XRP and ETH's initial sales structure. Ripple wants to see the reason not to treat BTC and ETH as securities. This request allows access to federal documents and information about the incident.
Now, it will be interesting to see that Ripple's continuous comparison to ETH will lead to a re-examination of ETH by SEC or not.