- Details of Senator Warren’s letter to the chairman Gary Gensler
- How does this effect Ripple Labs?
- SEC’s past battles
YEREVAN (CoinChapter.com) — Signs of troubles emerged for Ripple Labs as the US Securities and Exchange Commission (SEC) chairman Gary Gensler received an official letter from US Senator Elizabeth Warren Wednesday.
The five-page letter states a request to gain “information regarding the [SEC’s] authority to regulate cryptocurrency exchanges properly.” It also asks whether the US Congress “needs to act to ensure that the securities regulator has the proper authority to close existing regulatory gaps” that make people vulnerable to dangers in the “highly opaque and volatile [crypto] market.”
Warren also set a deadline (July 28) on Mr. Gensler’s response, concerning crypto exchange regulations and his future actions on implementing them.
Ron Hammond, the Director Of Government Relations at Blockchain Association, tweeted the news, commenting on the “uniquely close” relationship of Senator Warren and Chairman Gensler.
Is Ripple concerned?
Ripple Labs, as a company involved in an ongoing lawsuit with the law enforcement agency, Ripple Labs is in the crossfire.
In hindsight, the SEC filed the said lawsuit in December 2020. The agency accused the blockchain company of illegally selling $1.3 billion worth of its native token XRP. The institution deemed the token “unregistered securities,” which puts Ripple in violation of the US investment laws. Ripple fired back, accusing the agency of extreme bias. If SEC does not consider Bitcoin and Ethereum securities, there are no grounds to single out XRP.
Fast forward to Senator Warren’s letter: The lawmaker was concerned about crypto exchanges listing tokens that are not securities. As the letter states: “cryptocurrency exchanges may be able to escape federal regulation if the digital asset being traded does not qualify as a security under federal law”. The definition of “securities” is not clear when it comes to cryptocurrencies.
James K. Filan, an attorney directly involved in the SEC vs. Ripple case, offered his comments on the recent events. In his opinion, the Senator’s questions to the chairman were moot, as she already “drafted the answers.”
SEC’s legal assault on Ripple Labs is not unique; the law enforcement agency has fought battles with other blockchain companies in the past.
It filed over 75 lawsuits and actions against other cryptos, and most of them ended in a settlement. One of the former targets was Block.one, the company behind the EOS project. In 2019, the SEC ordered the tech company to pay up $24 million in settlement penalty for unregistered ICO (Initial coin offering).
The company was involved in another class-action lawsuit. It saw Block.one agreeing to a $27.5 million settlement to end the court proceedings. The similarities between the cases against Block.one and Ripple Labs might result in a similar agreement. Experts like attorney Jeremy Hogan believe it is already underway.
However, the battle over definitions is still ongoing. Are XRP and other analogous coins securities, or not? The question seems to be the cornerstone in the court proceedings. The answer might determine the token’s future.