Better Markets, a Washington-based nonprofit focused on safeguarding public interests in financial markets, has submitted an amicus brief backing the U.S. Securities and Exchange Commission (SEC) in its appeal against Ripple Labs, Inc.
The nonprofit emphasized the broader implications of the district court’s controversial ruling, which significantly narrowed the definition of “an investment contract.”
Concerns Over Narrowed Definition
The amicus filing argues that the district court’s decision undermines decades of legal precedents. The decision to remove some cryptocurrency offerings from investment contract status reduces SEC oversight in this space.
Also Read: SEC Forms a Task Force to Streamline Cryptocurrency Regulations
Better Markets wants to protect regular Americans who invest in crypto by stating these poor-quality services allow fraud and mistreatment. The nonprofit highlighted the significant risks stemming from the district court’s distinction between sophisticated institutional investors and retail investors.
By shielding institutional investors the court proposes rules that let retail investors at risk remain unprotected. Better Markets believes this judgment disrupts the core objective of securities laws which exist to protect investors without regard to their investment experience.
Ripple’s XRP Tokens and Investor Expectations
Better Markets asserts that XRP, Ripple’s cryptocurrency, satisfies the definition of an investment contract as outlined in the Supreme Court’s landmark Howey test. This test requires that an investment be made with the expectation of profits derived from the efforts of others.
In its defense, the nonprofit cited Ripple’s bold marketing efforts to assure investors that the company could make XRP profitable. The brief challenges the district court’s decision because it failed to see that XRP secondary market investors expected profit from Ripple’s activities.
Better Markets believes that the court failed to account for modern investment market operations because secondary market deals form an important part of how securities trade today.
What it Means to Crypto Regulation
Better Markets warned that the district court’s ruling could embolden issuers of crypto assets to design schemes that circumvent securities laws. Such schemes, immune from SEC oversight, could lead to widespread financial harm and erode market integrity.
The nonprofit emphasized that without robust regulation, the rapidly expanding cryptocurrency sector risks becoming a haven for illegal activities, including fraud and market manipulation.
Conclusion
Better Markets urges the appellate court to reverse the district court’s decision, reinforcing the SEC’s authority to regulate crypto securities. The nonprofit maintains that the ruling jeopardizes investor protections and sets a dangerous precedent for the cryptocurrency market and the broader financial landscape.
The case, which has drawn significant attention, may prove pivotal in shaping the future of cryptocurrency regulation in the United States.
Also Read: Here is the Trending Update in the Ripple vs. SEC Case, Possible Settlement?
