For two years, the US Securities and Exchange Commission (SEC) has been in a legal brawl with Ripple Labs. On December 22, 2020, the SEC filed a lawsuit<\/a>, in a federal district court in Manhattan, against Ripple Labs for raising funds totalling about $1.4 billion using XRP as a digital asset in a 2013 Initial Public Offering (IPO). The lawsuit alleged that Chris Larsen, Ripple Labs co-founder, and Brad Garlinghouse, Ripple\u2019s current CEO, also made personal unregistered sales of XRP totalling around $600 million. The SEC charged the defendants with violating the registration provisions of the Securities Act of 1993. The SEC cited the Howey Test \u2013 a US Supreme Court case for determining whether a transaction qualifies as an investment contract and therefore would be considered a security <\/i>subject to registration under the Securities Act of 1933 \u2013 to prove Ripple\u2019s violation of the Securities Act.<\/p>\n The SEC also alleged that XRP is an unregistered security because since 2013 the only utility for XRP has been as an investment contract. The litigation led to the delisting of XRP on Coinbase and other exchanges \u2013 mainly US-based exchanges.<\/p>\n Following the lawsuit, Ripple, however, went all the way with the SEC into a legal brawl instead of opting to negotiate a settlement. The main bone of contention<\/i> in the litigation has been, is XRP a security<\/b>? In the latest update, crypto law experts who spoke with Forbes<\/a> relayed key facts about the case, discredited the Howey Test, and suggested that the SEC is likely to lose the case.<\/p>\n The case has taken a few turns<\/i> over the past two years. Ripple has presented a series of arguments that have made it difficult for the SEC to have an easy win in the litigation; as a matter of fact, Ripple\u2019s arguments have brought some twists <\/i>into the case by which Ripple has been regarded by proponents as the favored party likely to win the litigation.<\/p>\n Ripple\u2019s first argument in the early days of the legal brawl was that it never received any warning or fair notice from the SEC regarding XRP being a security. The SEC filed a motion to strike Ripple\u2019s fair notice defense claiming the defense was legally insufficient and would lead the defendant to seek \u201cintrusive discovery\u201d; the court ruled against the motion.<\/p>\n Ripple\u2019s following argument in court was based on a speech made by William Hinman, the then director of Corporation Finance at the SEC, at the 2018 Yahoo Finance All Markets Summit. Hinman declared that despite Ethereum\u2019s 2014 initial Coin Offering (ICO), ETH is not considered a security by the SEC. In court, the SEC disclaimed Hinman\u2019s declaration and argued that Hinman\u2019s speech was his personal opinion and did not represent that of the SEC. However, Hinman was a member of the SEC leadership around the time the SEC filed the lawsuit against Ripple. In defense, Ripple demanded that the SEC also release the emails, memos and other documents to give a better view of how the SEC viewed cryptocurrencies and digital assets internally; the SEC rejected the demand and filed an appeal to a judge\u2019s order to comply with Ripple\u2019s demand.<\/p>\n Very recently, Ripple obtained the long-sought<\/i> Hinman documents. Stuart Alderoty, Ripple\u2019s general counsel, tweeted<\/a> in celebration over the collection of Hinman\u2019s documents. In his celebratory tweet, Alderoty said it was worth the fight to get hold of the documents.<\/p>\nWhat is the SEC Concealing?<\/h2>\n