Ripple leads as SEC struggles with Howey Test

Stuart Alderoty, Ripple’s Chief Legal Officer, highlighted two lawsuits where the US SEC debated the issue of ‘Common Enterprise’.


The ongoing legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) has been closely watched by the crypto industry. A Summary Judgment in the case, which is highly anticipated, could bring clarity to the classification of digital assets. Ripple’s Legal Officer has suggested that they have a favorable position in their fight against the SEC’s enforcement.

Ripple poised for victory against US SEC?

Ripple’s Chief Legal Officer, Stuart Alderoty, discussed two lawsuits in which the US SEC failed to prove the existence of a “Common Enterprise” according to the Howey Test.

During the discussion, Stuart Alderoty referred to a case called SEC v. W.J. Howey Co. from 1946. He pointed out that the SEC’s argument about the requirement of a “Common enterprise” was unsuccessful in that case. Alderoty stated that there was a “community of interest” instead. He believes that the SEC was wrong in the past and continues to be wrong on this matter.

Ripple’s Chief Legal Officer discussed the Revak v. SEC Realty Corp case, which reveals the SEC’s perspective on categorization. Alderoty referred to it as a sleight of hand by the SEC. He explained that according to the SEC, it doesn’t matter if the fortunes of investors are connected to the efforts of others if there is no “common enterprise.” However, he also mentioned that the Howey test is not easily met, implying that it has specific criteria that need to be satisfied.

John Deaton, who is supporting the XRP lawsuit as an Amicus Curiae, pointed out that the SEC has been presenting contradictory theories regarding the common enterprise. Initially, the SEC claimed that Ripple itself was the common enterprise. Later, it argued that Ripple compelled them to admit that XRP holders do not hold any ownership interest in the company.

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