First No-Action Letter Issued to Crypto Firm by SEC, Will Ripple’s XRP Coin Be Next Up?
The United States Securities and Exchange Commission (SEC) has been working to find the best way to regulate the crypto world, starting with establishing how to classify them. This week, the SEC issued a no-action letter in the crypto industry. Considering the similarities in the situation with Ripple’s XRP token, reports from Ethereum World News suggest that there is a possibility that the token could get the same letter.
A no-action letter is a letter that is provided by a government body which basically says that the recipient will not be subjected to legal action against them. The letter from the SEC this week was issued to a blockchain startup for private jet services called TurnKey Jets.
Presently, there is a case in the works against XRP, considering that there are some people that see this as a security token. So far, the SEC has already stated that they don’t believe Bitcoin or Ethereum to be a security, but the status of XRP is unclear.
Jake Chervinsky commented on the matter on Twitter, saying that the letter “isn’t too interesting,” considering that there was not much doubt that the recipient of the last letter was not actually a security. However, he does not believe the point of the letter was to actually clarify anything, but to send a message to exchanges that the SEC is willing to give a little slack to anyone that comes to them first.
21/ The no-action letter itself isn't too interesting. There's little doubt that TKJ tokens aren't securities. We didn't need a letter for that.
But that's not what it was for. It was another message from the SEC: "if you come talk to us, we'll go easy." If you don't? 🤷♂️
— Jake Chervinsky (@jchervinsky) April 4, 2019
Ripple has been the subject of a lot of attention lately, with one issue being a lawsuit against the company by multiple XRP token holders. The token holders say that Ripple controls XRP, adding they think that XRP should be considered a security, based on the drastic difference between the way that XRP acts from the rest of the crypto assets.
In November, the case moved to federal court after Ripple made the argument that it should be addressed by federal court, based on the fact that there are over 100 members to the lawsuit. Ripple added that plaintiffs do not say that they did not have the right information in the transactions, but that they were harmed from Ripple’s lack of registry as a security token.
Chervinsky commented on this aspect of the matter as well, adding that the determination of whether XRP should be considered security will likely not happen this year, unless Ripple decides to voluntarily say they are security. However, he added that he “sincerely doubt[s]” that will happen.
17/ So, when will we know if XRP is a security?
Probably not in 2019 unless Ripple decides to change course & voluntarily treat XRP as a security (which I sincerely doubt). Class actions are good for many things, but quickly resolving complex securities issues isn't one of them.
— Jake Chervinsky (@jchervinsky) March 22, 2019
Right now, Ripple Labs and XRP II LLC, which are both subsidiaries of Ripple, are both included as defendants. The leaders of the companies – Brad Garlinghouse, Ron Will, Christian Larsen, Eric van Miltenburg, and some others – are also individually included in the lawsuits. The plaintiffs were not happy with the movement to federal court, saying that the legal fees that they now will incur should be covered by Ripple, as Chervinsky wrote.
The plaintiffs in the Ripple securities class action have filed motions to remand in federal court, asking to go back to state court (again).
They also say Ripple should pay their legal fees, saying the removal to federal court was "frivolous" & had "no basis in law or fact."
— Jake Chervinsky (@jchervinsky) December 8, 2018
There has been no swaying from the plaintiffs that they think that Ripple should be security, adding that multiple laws were broken when they failed to register as such. Even though the plaintiffs moved to take it back out of federal court, the judge ultimately denied the motion, saying that the two sides had 14 days to sort it out. Within 30 days, an amended consolidated complaint will need to be filed in court.
The case is continuing to drag on, though there are many Twitter users that believe that a no-action letter will ultimately be issued to Ripple. There is no supporting evidence that says that these will be the actions taken by the SEC, but it would end the lawsuit entirely if one comes through.