Crypto lobbying group Blockchain Association has asked permission to support cross-border payments company Ripple as a friend of the court in its case against the U.S. Securities and Exchange Commission (SEC).
According to published reports Sunday (Oct. 30), the Washington, D.C., organization is also asking a federal court for leave to become part of the case.
“The SEC’s extremely broad interpretation of the securities laws would have devastating effects on the industry (and even outside the industry),” the Blockchain Association said in its motion.
The SEC sued Ripple and two of its top executives in December 2020 for allegedly selling unregistered securities in the form of the XRP tokens created by its founders, demanding $1.3 billion in restitution.
The SEC has alleged that CEO Brad Garlinghouse and Executive Chairman Chris Larsen “were objectively reckless in believing that XRP was not a security and that Ripple was on ‘fair notice’ that XRP was a security,” U.S. Magistrate Judge Sarah Netburn wrote in ordering the agency to turn over the documents.
Earlier this month, Ripple claimed it won a victory in its case that could help determine whether cryptocurrencies are securities.
As PYMNTS noted, that question is crucial to the use of crypto as a payments currency both because it is much harder to issue digital assets if they must adhere to securities regulations and because paying with securities triggers an IRS capital gains reporting requirement.
Although the case is unlikely to go to trial this year, Ripple’s victory came from the fact that it had gained access to internal SEC deliberations about a speech the agency’s then-director of its division of corporate finance, William Hinman, gave in 2018.
In that speech, he argued that the No. 2 cryptocurrency ethereum had morphed from a security into a non-security. That is a position the SEC commissioners at the time never formally endorsed and that current SEC Chair Gary Gensler has said applies only to bitcoin.
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