By Mark Ackman
On Friday, a Washington-based group of crypto lobbyists called Blockchain Association asked for the court’s permission to back Ripple in the ongoing SEC lawsuit. Towards the end of 2020, the SEC filed a lawsuit against Ripple, claiming that it was selling the XRP token as an unregistered token.
Since then, a number of procedural motions have been passed in court. Recently, both SEC and Ripple filed motions for a summary judgment.
Blockchain Association Files Motion for Leave
Then, the Blockchain Association filed for permission from the court overseeing the SEC versus Ripple case. The group filed a motion for leave, which asks the court to consider letting the party that filed the motion deviate from the set procedures of the court.
In the motion for leave, the Blockchain Association stated that the SEC broadly interprets the securities laws, which can have detrimental effects on the industry.
In addition, a memorandum of law supporting the motion explains that the initial brief indicates other uses of cryptocurrency tokens in the industry and not just Ripple.
Brief Elaborates That Tokens Don’t Meet Tenets of Howey Test
In the brief, they argue that the court should consider a token’s actual purposes. It argues that the Securities and Exchange Commission acted unlawfully by looking at the secondary sales as a way to prove that Ripple was in violation of federal securities laws.
The brief elaborates that when it comes to secondary market transactions, numerous tokens are used, so using that as proof of Ripple’s violation would be inaccurate.
More importantly, these tokens don’t meet the requirements of the Howey Test, which is a precedent set by the Supreme Court in determining whether an asset is a security.
Most of the filing emphasizes how broadly the SEC applies security laws to tokens besides initial sales.
By that definition, existing securities laws fail to comprehend how an asset that, although issued as a token initially, can remain when it’s no longer bound to an investment contract, which is an important point when applying the Howey Test.
Investor Choice Advocates Group Files Amicus Brief
On Friday, the Investor Choice Advocates Group and SpendTheBits Inc. also asked for the court’s permission to file an amicus brief. Both groups made the argument that the securities agencies rely on a broad definition of the term ‘investment contract,’ to make their case.
They also point to current legislative efforts to demarcate where the Securities and Exchange Commission’s jurisdiction over cryptocurrencies starts and ends.
The brief boldly claims that until different parties can come to an agreement as to what constitutes security, the securities agency has no jurisdiction to fill what it is considering a vacuum.