Ripple Labs’ chief legal officer has taken aim at the United States Securities and Exchange Commission (SEC) repeated use of the phrase “crypto asset security,” arguing it is a fabricated term with no legal grounding.
In a recent Aug. 30 filing, the SEC warned it could challenge any plan by defunct crypto exchange FTX to use stablecoins in repaying creditors, with the regulator noting its portfolio has “crypto asset securities.”
Ripple's top lawyer, Stuart Alderoty, argues the SEC is trying to “deceive judges” by using the term.
Source: Stuart Alderoty
“The term ‘crypto asset security’ is nowhere to be found in any statute — it's a fabricated term with no legal basis,” he said in an X post on Sept. 2.
"The SEC needs to stop trying to deceive judges by using it."
In an August update to the SEC's legal battle with crypto exchange Kraken, the Federal Court for the Northern District of California also took issue with the term, saying the "crypto asset security" concept is “unclear at best and confusing at worst.”
SEC once ruled art gallery wasn’t selling unregistered securities
In an Aug. 29 X post, Alderoty also took aim at the regulator’s Wells notice to NFT marketplace OpenSea, which claims the tokens being sold on the platform might be unregistered securities.
According to Alderoty, the agency already made a ruling in similar circumstances over 40 years ago when they decided an art gallery didn't need to register with the SEC, even if buyers had investment motives when purchasing art.
In a letter shared by Alderoty, a gallery, the Art Appraisers of America, acting on behalf of an artist, William Nelson, was asking for clarification around whether the selling of lithographs, print drawings, would violate laws against selling unregistered securities.
Source: Stuart Alderoty
The gallery was concerned because collectors could buy them as investments and, in theory, sell them after they increased in value down the track.
In this case, the SEC decided not to proceed with enforcement actions.
"In 1976, the SEC ruled that art galleries, even when promoting and selling to buyers that had investment motives, didn’t need to register with the SEC,” Alderoty said.
Related: Crypto advocates criticize SEC notice to OpenSea
However, the letter did note that the decision could change if the gallery made false declarations about the art sale, or if the SEC were to find “different facts or conditions,” it might “require a different conclusion.”
It also declared the decision was not a “legal conclusion on the question presented,” only a specific ruling in this situation.
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