Stuart Alderoty, the Chief Legal Officer (CLO) of Ripple, has once again shared his insights on the recent court decision in the SEC v. Coinbase legal battle.
On March 27, U.S. District Judge Katherine Polk Failla ruled in favor of the SEC, allowing the Coinbase lawsuit to move forward to the discovery phase. Alderoty has been commenting on the decision since it was made public.
Over the weekend, he expressed his belief that the SEC presented a facade, which would require the regulatory agency to provide strong evidence to support its allegations when the trial begins.
Alderoty has criticized the court’s definition of a crypto ecosystem in a recent post. He stated that the decision offered four different and confusing definitions of what constitutes a crypto ecosystem. He attached excerpts from the ruling that highlighted these confusing definitions.
According to the document, the court emphasized that the SEC specifically defined an ecosystem in a narrow sense, referring to the coordinated enterprise involving the issuers and promoters of the 13 crypto assets labeled as securities in the Coinbase lawsuit, including SOL, ADA, and MATIC.
However, the court also gave a broader definition, stating that an ecosystem includes the token issuer, crypto asset providers like exchanges, wallet providers offering secure storage for the asset, the token’s underlying technology, and regulated financial institutions with exposure to the token.
Alderoty characterized the definition of an ecosystem in the Coinbase lawsuit as legal nonsense. He noted that the SEC’s position suggests that by acquiring a token, an individual is inherently investing in an ecosystem, regardless of the circumstances surrounding the acquisition.
In addition to this, Alderoty brought up a ruling in the Ripple lawsuit where Judge Analisa Torres acknowledged that the SEC had deviated from the Howey test in relation to Ripple’s programmatic sales of XRP.
Judge Torres held that programmatic investors did not expect to make profits from Ripple’s efforts because the sales were conducted through blind bid/ask transactions. The ruling noted that programmatic buyers could not have known if their payments went to Ripple or any other sellers of XRP.
Alderoty’s mention of the Ripple decision prompted prominent legal expert Bill Morgan to weigh in on the issue. Attorney Morgan criticized the SEC for categorizing Ripple’s XRP sales into three groups but failing to provide sufficient evidence for claims on the third group: other distributions.
Judge Torres held that there was no evidence showing that Ripple funded its project by transferring XRP to third parties and having them sell the coins to raise funds.
Morgan speculated that the SEC might have considered other distributions of XRP to be part of an ecosystem but not a common enterprise. He noted that these other distributions did not constitute investment contracts.
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