- Regulator claims XRP token is unregistered security
- Tokenholders granted amicus status to offer legal views
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(Reuters) – A group of individuals who own digital tokens associated with Ripple Labs Inc can offer their “meaningful perspective” in the U.S. Securities and Exchange Commission’s case accusing the company of violating securities law, a Manhattan federal judge ruled on Monday.
U.S. District Judge Analisa Torres wrote that the six holders of XRP, the world’s seventh-largest cryptocurrency by market value, can offer opinions on certain legal questions in the lawsuit, which alleges the token is an unregistered security.
The case is being closely watched by attorneys in the crypto space, as regulators continue to grapple with how to regulate the asset class. The SEC has sued some digital token issuers for selling unlicensed securities, while other assets such as Bitcoin and ether have avoided the label.
The XRP tokenholders sought to intervene in March, saying they were de facto defendants in the case and wanted to protect their interests.
John Deaton of the Deaton Law Firm, who represents the XRP holders, and a spokesperson for the SEC did not immediately respond to a request for comment on Monday.
“We were all granted amicus status today!” Deaton wrote on Twitter, where the ruling was celebrated by cryptocurrency enthusiasts.
Ripple’s founders created XRP in 2013. The SEC sued the San Francisco-based company and its current and former chief executives in December, alleging they have been conducting a $1.3 billion unregistered securities offering since the token’s creation.
Ripple and the executives have denied the allegations, and the company has argued that XRP has traded and been used as a digital currency.
The XRP holders including Deaton’s daughter, Jordan, said in their bid to intervene in the case that the token lost $15 billion in value when crypto exchanges in the U.S., including Coinbase, delisted or suspended trading in XRP after the SEC sued.
Torres denied the XRP holders’ bid to intervene as a class in the case, which she said would cause undue delay.
The SEC had argued against letting the token holders act as amici and present evidence. Torres ruled they will only be allowed to make legal arguments on issues such as whether the case should be dismissed.
The case is SEC v. Ripple Labs Inc, U.S. District Court, Southern District of New York, No. 20-CV-10832.
For the amici: John Deaton of the Deaton Law Firm
For the SEC: Jorge Tenreiro
Jody Godoy reports on banking and securities law. Reach her at email@example.com