Commentators and market participants-including Ripple-have called for regulatory clarity for the cryptocurrency market, arguing that this would drive more entrepreneurial activity. Though it occurred in the context of private litigation, this ruling further highlights the gray area in the regulatory framework for cryptocurrencies. Vice Chancellor Zurn denied that request on March 11, noting that the court had already expedited the case-Ripple sought summary judgment and dismissal on March 9, and if that motion is denied, trial is currently scheduled for March 25 and 26. resolves the question of whether XRP is a security" and the "enforcement action, by contrast, asks that question."įollowing the ruling, Tetragon immediately sought to have the question certified for interlocutory appeal. Vice Chancellor Zurn reasoned that the mere act of filing an enforcement action "is not itself the act of deciding something officially" like a "final decision by a court or administrative agency." Rather, the SEC's filing of a lawsuit "initiates a process by which the Court will ultimately determine whether XRP is a security on a current and going forward basis." While the SEC can take the litigation position that XRP is a security, the SEC "left the final resolution of whether it is a security to the Court." As a result, Vice Chancellor Zurn concluded that "XRP is no more a security after the SEC filed the enforcement action than it was before it" because " determination. Vice Chancellor Zurn disagreed with Tetragon, concluding that neither the Wells notice nor the SEC's lawsuit qualified as a final and authoritative SEC determination that XRP is a security. In that lawsuit, Ripple maintains that XRP is not a security. In the New York suit, the SEC alleged that XRP is a security and that Ripple sold 14.6 billion XRP tokens since 2013 without filing a registration statement. Tetragon argued that the SEC has officially determined that XRP qualifies as a security when it issued a Wells notice and then filed an enforcement action against Ripple and two of its executives in December 2020 in the US District Court for the Southern District of New York. The ruling addressed a central issue in Tetragon's suit: whether recent actions brought by the SEC effectively determined that XRP qualifies as a security, a determination that would have sweeping implications for the cryptocurrency market as a whole. Ripple, for its part, took the position that no securities default had happened because the Securities and Exchange Commission (SEC) has not yet issued a final decision that the token qualifies as a security. Tetragon argued that a securities default occurred under the parties' stockholders' agreement, triggering Ripple's redemption obligations. (Tetragon), an investment company and majority shareholder of Ripple's Series C preferred stock, sought a preliminary injunction to force a $175 million stock redemption by Ripple. Ripple uses blockchain innovation, including the cryptocurrency token "XRP," to send money around the world. (Ripple) achieved a big win in Delaware Chancery Court bearing on whether a cryptocurrency token qualifies as a security under the US securities laws. On March 5, 2021, payments technology company Ripple Labs Inc.
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