Lawsuit turns to ‘Crypto Mom’ Hester Peirce’s SEC criticism

July 23, 2021 Editor Ripple 0

  • Ripple is now asking the court to consider statements made by Crypto Mom Hester Peirce that the SEC hadn’t done enough to regulate cryptos as support for its motion to dismiss.
  • The SEC immediately fired back stating that a Commissioner’s statements are no grounds for market participants to violate securities laws and urged the court to dismiss the argument.

The Ripple vs. the U.S Securities Exchange Commission legal battle has taken an unexpected turn, and this time, one of the regulator’s top officials may ultimately turn the case against it. Ripple’s latest filing has urged the court to take into account statements made by one of the five commissioners – ‘Crypto Mom’ Hester Peirce – as supplemental support for its motion to dismiss the case. Crypto Mom has recently commented that there is a lack of clarity for crypto companies from the SEC, a statement that Ripple believes builds on its lack of fair notice defense.

Ripple filed the motion with the Southern District of New York, requesting Judge Analisa Torres to consider statements by Crypto Mom, as well as fellow commissioner Elad Roisman, as “supplemental authority in support of Ripple’s opposition to the SEC’s pending motion to strike Ripple’s fair notice defense.”

In its filing, Ripple claimed that the two top-ranking officials have “candidly explained that there’s a decided lack of clarity for market participants around the application of securities laws to digital assets and their trading.”

Ripple’s legal team further claims that the two commissioners have recently made statements expressing the belief that the application of the Howey test to cryptos is not crystal clear. They further reportedly stated that “the only certainty [they]see is that people have questions about how to comply with the applicable laws and regulations.”

Related: “We don’t care if Ripple’s XRP is a security or not” – crypto broker

SEC to Ripple: Crypto Mom can’t change an Act of Congress

The SEC was quick to fire back, filing its response almost immediately in New York. In the response, the regulator told Ripple off for attempting to use Crypto Mom’s statements as defense. It issued five reasons why Ripple’s argument is flawed.

Of note is that this is not the first time the SEC is having to defend itself over statements made by a high-ranking official. William Hinman, a former director, has been at the center of a legal battle following a statement he made years ago that Ether and Bitcoin are not securities.

And just as it did with Hinman, the SEC has sought to make it clear that comments by Crypto Mom and Roisman are “not a statement of the SEC itself or any sort of binding authority on this Court.”

It added:

Essentially, Defendants’ arguments are tantamount to arguing that they cannot be found liable for violating a statute on the grounds of certain public statements by legislators who disagree with the statute.

The watchdog further dismissed the two commissioners’ statements, claiming that “even the full SEC may not waive the requirements of an act of Congress.” A mere statement by an official can’t repeal Section 5 of the Securities Act, the regulator pointed out.

The SEC has been warning crypto issuers that they must comply with the federal securities laws, the watchdog went on.

It concluded:

This case should not be decided on the basis of speeches but on the basis of Howey and the cases applying it, just like every other case in the digital asset space has been decided.