Ripple has filed a “motion to compel responses to interrogatories” with the Securities and Exchange Commission, in which they inquire if Ether is a securities. This line of questioning, as Attorney Jeremy Hogan points out, is a "AMAZING" approach because it weakens the SEC's case regardless of the answer supplied.
SEC Chairman Gary Gensler refused to answer the same question at the Aspen Security Forum last month. His remark backs up the notion that the SEC doesn't want to be exposed any more.
The SEC, however, is baffled about wiggling out of a response now that the issue has been established in a court setting.
The Ripple Defense argues that there was no fair notice.
In December of last year, just before Christmas, the SEC filed a lawsuit against Ripple. They claimed Ripple had sold $1.3 billion worth of stocks illegally since 2013.
Ripple's legal team has prepared a defense on numerous fronts during the discovery phase that followed, which is still ongoing, the most important of which is the fair notice defense.
It makes the case that Ripple assumed XRP, Bitcoin, and Ether were equal in the eyes of the SEC.
Ripple assumed the same thing about XRP because former SEC Director William Hinman had previously stated that neither Ether nor Bitcoin met the criteria for securities. Furthermore, Ripple claims they were unaware of any violations of applicable securities law since the SEC did not provide fair warning otherwise.
During the discovery process, it was discovered that Hinman's approval of Ether/Bitcoin was merely a personal view and should not be interpreted as the regulator's position.
As a result, this admission has sparked a can of worms. Why were they permitted to operate without hindrance if Ether is a security? Or, if not, why is Ripple being singled out by the SEC?
If they do, they are damned; if they don't, they are damned.
In response to the "move to compel responses to interrogatories" filing, Hogan points out that adopting a formal position on Ether's securities classification puts the SEC in a tough position, regardless of how they respond.
“If the response is no, Ripple has the opportunity to compare XRP to Ether. And, as far as we know, Ethereum was the first cryptocurrency to hold an ICO...
For the SEC, “Yes” is not a politically viable response.”
A comment along the lines of the Ether's status is unknown might, on the other hand, support Ripple's fair notice defense.
How could Ripple know they were breaking securities legislation by selling XRP tokens if the SEC can't establish whether Ether is a security?
“For Ripple, the “Is Ether a security?” question is a win, win, or win,” says Hogan.
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