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03/09/24
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Ripple’s Legal Chief Challenges SEC’s ‘Crypto Asset Security’ Terminology
Ripple Labs’ chief legal officer has criticized the U.S. Securities and Exchange Commission (SEC) for repeatedly using the term “crypto asset security.” He contends that this phrase lacks any legal foundation and is essentially a made-up concept. In a recent filing, the SEC expressed that it might challenge any proposals from the now-defunct FTX exchange to utilize stablecoins for repaying creditors, referring to its holdings as “crypto asset securities.”
Stuart Alderoty, Ripple’s top attorney, argues that the SEC’s language aims to mislead the courts. He emphasized that the term has no backing in legal statutes and suggested that its use is an attempt to deceive judges. Furthermore, a federal court in California recently commented on the ambiguity of the term, stating that it is “unclear at best and confusing at worst,” highlighting the ongoing confusion around the classification of digital assets.
In addition to his critique of the term, Alderoty addressed the SEC’s recent Wells notice to the NFT marketplace OpenSea, which posits that the tokens sold on the platform could be deemed unregistered securities. He pointed out that, in a similar scenario over 40 years ago, the SEC determined that an art gallery did not need to register as a securities dealer even if buyers intended to purchase art as an investment.
This decision arose when the Art Appraisers of America sought guidance on whether selling lithographs would violate securities laws, considering potential investment motives of art collectors. The SEC concluded that no enforcement actions would be taken in this instance, establishing a precedence that still resonates with current discussions about the regulatory landscape for digital assets today. However, it noted that different circumstances could prompt a reevaluation of such decisions.
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