The lawsuit filed by the Securities and Exchange Commission (SEC) against Ripple Labs, according to Cardano co-creator Charles Hoskinson, is absurd.
In late 2020, the SEC filed a lawsuit against Ripple Labs, alleging that the company issued XRP as uncertified security.
Hoskinson Defends Ripple Labs Despite Previous Criticism
In 2021, Hoskinson stated in a Tweet that the SEC should punish Ripple executives for alleged unreported sales of XRP icons. He also praised Chairperson Gary Gensler for being an “incredibly smart individual.”
Following comments criticizing Ripple and XRP, Hoskinson clarifies his position in an October 2022 Twitter thread about the SEC vs. Ripple dispute. He believes that most Layer-1 protocols are not securities because of their utility, decentralization, and ability to pass the Howey Test, a set of standards to determine if a transaction is an investment contract or security.
In the Twitter thread, Hoskinson stated:
I’ve always taken a position that most layer-1 protocols aren’t securities because it’s bizarre and senseless to consider something that offers utility, is decentralized enough to have operators and builders throughout the world, and survives its founders passing [the Howey test].
The Cardano creator, instead, has a real problem with the lack of a regulatory framework or laws that would allow the SEC or the CFTC to regulate the crypto market effectively, blaming legislative bodies for the negligent passing of crypto laws.
Hoskinson asserts that regulation of crypto is imminent. However, he adds that commodities regulations are better suited for the crypto industry than securities laws because commodities are market-oriented, principles-based, and outlast their creators.
Hoskinson went on to recall his experience with the “passionate” XRP community and noted that XRP Ledger could survive without a central governing entity for decades, stating, “Ripple created something that has an ecosystem that will survive [its executives] or anyone else. The very fact that there is an independent XRP army criticizing me is proof of this reality. The ledger will run likely for decades trading value.”
Ripple Labs Lawsuit “Absurd”
Despite the Cardano co-founder siding with the cryptocurrency exchange, he does disagree with Ripple’s lawyers’ strategy for arguing the case against the SEC.
According to him, “The merits of the case should rest on the absurdity of applying securities regulation to something that has millions of independent participants in more than 100 countries who cannot be controlled by any fiduciary of a single company.”
Hoskinson believes that this approach should be based on the case’s merits and that Ripple lawyers should be able to rely on something other than personal attacks on current or former government employees or on Bitcoin energy use.
This viewpoint is in response to Ripple Lawyers’ approach. Where they claim that former SEC director William Hinman exempted Bitcoin and Ethereum from securities violations solely because firms compensated Hinman with a financial interest in ETH.
Read SEC Files Motion To Block New Third-Party Evidence In Ripple XRP Lawsuit
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