Stuart Alderoty, Ripple’s general counsel, has once again criticized the U.S. Securities and Exchange Commission’s (SEC) approach to digital assets.
Alderoty, referencing the landmark Howey case, argued that the SEC’s current stance on crypto assets is so divergent from the established law it borders on the absurd.
His came in response to a recent oral argument where the SEC compared investing in crypto assets to investing in an “ecosystem of oranges,” a view that Alderoty argued would have been dismissed in earlier times.
The SEC’s network argument
The SEC’s stance is that cryptocurrency tokens are not merely collectible items but rather keys to an underlying business enterprise, specifically the network or ecosystem they represent.
This view was iterated during Coinbase’s oral argument, with the SEC lawyer emphasizing the investment nature of these tokens.
Buyers aren’t just purchasing a digital asset; they’re buying into the enterprise and the network it entails with the expectation that the value of their investment will grow alongside the network’s success.
Divergent views on digital assets
In contrast, cryptocurrency exchange Coinbase has countered the SEC’s claims in a legal battle that has the potential to set a precedent for the industry.
The company’s stance is that digital tokens are more akin to collectibles than securities, like the Beanie Babies craze of the ’90s, and therefore should not be subject to the same regulatory framework as traditional investment contracts like stocks or bonds.
The SEC, however, maintains that the purchase of crypto tokens constitutes an investment in the issuer’s enterprise, thus falling under the purview of securities law.
The outcome of this disagreement is pending as Judge Katherine Polk Failla deliberates over the arguments presented during a lengthy hearing. Her decision is anticipated to be a decisive factor in defining the SEC’s jurisdiction over the crypto sector.