Earlier this week, the United States Securities and Exchange Commission (SEC) issued its first no-action letter to a cryptocurrency company. However, with Ripple’s XRP facing the same situation, could the commission issue a similar letter?
SEC Issues Its First No-Action Letter to a Crypto Firm
Earlier this week, SEC issued its first no-action letter to a company in the cryptocurrency and blockchain space. A no-action letter is a letter given by a government body to a company notifying them that no legal action will be taken against them. The letter was issued to TurnKey Jets, a blockchain startup that offers private jet services.
There is a case against XRP at the moment as the cryptocurrency is regarded as a security in some quarters. While the commission came out to clarify that Bitcoin and Ethereum are not securities, it is yet to say anything regarding XRP’s status.
Some XRP token holders are suing Ripple Inc because they believe that the company controls and command the cryptocurrency. The accusers noted that XRP is a security since it acts more like the stocks of Ripple and in no way operates like a regular cryptocurrency.
In November last year, the case was moved to a federal court after Ripple argued that the lawsuit against them has the requirements suited for a federal court. The defendant citing reasons for the move stated that there are more than 100 members in the suing class, and roughly one plaintiff is from a different state from the defendants while the total amount being sued has exceeded $5 million.
Ripple said that “Plaintiffs do not allege that they lacked information about the nature of these transactions.” Despite that, the plaintiff claims that they were harmed because Ripple Inc was required the register the cryptocurrency as a security with the SEC but failed to do so.
The defendants in this lawsuit include Ripple subsidiaries Ripple Labs and XRP II LLC—” a Ripple subsidiary that is a registered and licensed money service business (MSB)”, as well as those leading these companies; Brad Garlinghouse, Ron Will, Christian Larsen, Eric van Miltenburg, and others.
The movement of the case to a federal court angered the plaintiffs who demanded that Ripple pay their legal fees since transferring the case to a higher court was frivolous and had no basis in law.
The plaintiffs continue to maintain that XRP is a security and Ripple breached state and federal laws when it failed to register the digital currency as a security before offering it to investors, promoting it, and selling it.
Last month, the federal court ruled that the case will be continued there, denying the motion filed by the plaintiff. The ruling gave the two parties two weeks to conduct a meeting and plan how to move forward with the litigation. After 30 days, the complainant is expected to file an amended consolidated complaint which is a revision of the original charge.
Ripple Could Get A No-Action Letter
While the case between Ripple and the XRP investors drag on, a Twitter user, Tex S Hodlem is of the opinion that the commission will issue a no-action letter to Ripple Inc. According to the tweet, “SEC no-action letter for #Ripple on Monday the 8th regarding #XRP.”
While there is no concrete fact to back up such a claim, the crypto sector has been known to spring surprises. If the commission issues a no-action letter, then it would signify the end of the lawsuit as it would show that XRP is not a security.