SEC Raises Concerns Over Ripple's Compliance in its Final Reply in XRP Case

US Securities and Exchange Commission (SEC) has taken a firm stance against Ripple in its recent and final response to the ongoing litigation concerning the legal status of XRP. 

The regulatory body questioned Ripple’s assertion of non-recklessness in its operations concerning the sale and distribution of XRP tokens. According to the SEC, Ripple's historical activities suggest a pattern that might lead to future regulatory breaches, thereby emphasizing the need for stringent legal orders to prevent such outcomes.

Analysis of SEC's Response

In its filing, the SEC refuted Ripple’s claims that it acted without recklessness. The regulator highlighted inconsistencies in Ripple’s compliance with legal norms and dismissed the company’s plan to reformat its XRP sales based on the results of the lawsuit. 

The SEC's documents underline a skepticism towards Ripple's commitment to adhere to regulatory standards going forward, given past behaviors.

The SEC's filing also took issue with Ripple's proposal to limit its XRP sales to non-U.S. markets and accredited investors only, a strategy Ripple argued would mitigate legal risks. According to the SEC, this move avoids more stringent compliance measures that may be required and overlooks the fact that such defenses were insufficient at an earlier stage.

Ripple suggested several operational changes following earlier court decisions, including modifications to its On-Demand Liquidity (ODL) sales contracts. SEC officials criticized these changes, stating that the proposed limitations on these contracts were inadequate and did not align with the breaches previously reported. 

The agency expressed concerns that Ripple’s current proposals do not fully meet the legal standards required for future compliance.

Comments from Ripple's Legal Team

In response to the SEC’s criticisms, Stuart Alderoty, Ripple's chief legal officer, voiced concerns about the SEC's declining reputation and its approach to regulatory enforcement. 

Alderoty argued that international regulators, who oversee robust crypto licensing frameworks, would find the SEC's actions puzzling, comparing them to a simplistic and arbitrary issuance of fishing licenses. He remains optimistic about a favorable resolution to the XRP lawsuit.

Further, Bill Morgan, a pro-XRP lawyer, has expressed concerns about the SEC’s push for a permanent prohibition of Ripple’s ODL sales. 

Despite facing significant legal challenges in the United States, Ripple has not slowed its business activities. The company recently announced a partnership with Tokyo consulting firm HashKey DX to enhance its XRPL enterprise solutions in Japan.

The SEC argues that Ripple's historical activities indicate a need for strict legal oversight and questions Ripple's proposed operational changes.