Crypto News – Ripple’s Legal Chief Blasts SEC’s “Crypto Asset Security” Term as Baseless

Crypto News – Ripple’s Chief Legal Officer Challenges SEC’s Use of “Crypto Asset Security” Term

Crypto News – Ripple Labs’ Chief Legal Officer, Stuart Alderoty, has strongly criticized the United States Securities and Exchange Commission (SEC) for its repeated use of the term “crypto asset security,” labeling it as a fabricated phrase with no legal foundation. In a post on X (formerly Twitter) dated September 2, Alderoty argued that the SEC is attempting to mislead judges by employing this term, which is not found in any existing statutes.

The SEC has recently referred to “crypto asset securities” in its ongoing legal actions, including a warning issued on August 30 against any plans by the defunct crypto exchange FTX to use stablecoins for repaying creditors. The regulator highlighted that its portfolio contains “crypto asset securities,” a term Alderoty contends lacks legal grounding.

Ripple’s Legal Challenge Against the SEC

Alderoty’s comments come in the wake of broader criticism of the SEC’s approach to regulating the crypto industry. In a recent development, the Federal Court for the Northern District of California echoed concerns over the term “crypto asset security” in its legal battle with crypto exchange Kraken, describing the concept as “unclear at best and confusing at worst.”

This sentiment reflects the ongoing tension between the SEC and various stakeholders in the crypto space, who argue that the agency’s use of such terms may be an overreach, potentially leading to misinterpretations of the law.

Historical Precedents: Art Galleries and Unregistered Securities

Alderoty also referenced a historical precedent to bolster his argument against the SEC’s current stance. In an August 29 post on X, he criticized the SEC’s recent Wells notice to NFT marketplace OpenSea, which suggests that the tokens sold on the platform could be considered unregistered securities. Alderoty pointed to a case from over 40 years ago where the SEC decided that an art gallery did not need to register with the agency, even if buyers were motivated by investment purposes.

In 1976, the Art Appraisers of America sought clarification from the SEC on behalf of artist William Nelson regarding the sale of lithographs and print drawings. The gallery was concerned that collectors might purchase these artworks as investments, potentially reselling them at a higher value later. However, the SEC ruled that the gallery was not required to register, as long as there were no false declarations made about the sale.

Alderoty highlighted this case to demonstrate the inconsistency in the SEC’s approach, noting that the agency’s stance could change based on “different facts or conditions,” but the historical ruling still sets a significant precedent.

FAQ: Ripple’s Challenge to the SEC’s Use of “Crypto Asset Security”