FinTelegram reported that the New York Democrat Congressman Ritchie Torres reaffirmed his recent criticisms of the embattled U.S. Securities and Exchange Commission (SEC) chair Gary Gensler. The lawmaker accused the SEC Chair of trying to undermine the crypto industry and “weaponizing” the agency against it. Torres urged Gensler and the SEC to reevaluate their approach to cryptocurrencies following what he described as a “dreadful day in court” for the SEC.
Weaponizing Against The Crypto Industry
In a letter, Torres urged the SEC to focus its enforcement actions on well-known wrongdoers instead of treating the majority of crypto assets as securities and asserting jurisdiction over them in an arbitrary manner. That would destroy the crypto industry in the U.S. The Congressman’s letter was prompted by a recent court ruling in the SEC’s case against Ripple, which suggested that the XRP token might not be considered a security.
“Under Chairman Gensler’s leadership, the SEC has not provided clear guidance or issued any rules on crypto-assets,” Torres remarked. “Instead, it has sent conflicting messages, contradicting not only the CFTC but even contradicting itself.“
The Howey Test
The SEC alleged that the sale of $1.3 billion worth of XRP tokens since 2013 was an unregistered securities offering. However, Judge Analisa Torres ruled that only sales to institutional buyers could be deemed as securities, not those to retail purchasers or employee salaries paid with XRP, as they did not meet the criteria of investment contracts.
Ritchie Torres pointed out that the SEC’s application of the Howey Test, which determines if transactions qualify as investment contracts, has been inconsistent. He praised the recent court ruling as a “return to rigorous application” of the test. Torres shares the belief of several experts that a swift appeal against the court decision is unlikely.
The SEC’s case against Coinbase and other players in the crypto industry could also face challenges due to the court’s new legal basis in the XRP ruling. The SEC filed a lawsuit against Coinbase in June, alleging that the exchange offered unregistered securities.
As of now, the SEC’s response to the Ripple court ruling remains uncertain. Gensler expressed disappointment over the potential impact on retail investors, and the Commission is still deliberating on how to proceed.