An Open Letter to Congress
I was recently asked on twitter to draft a letter that crypto enthusiasts can use to send to their Congressmen, Congresswomen, and Senators regarding the SEC v. Ripple lawsuit. As such, included below, you will find an open letter to Congress that you can each (if you choose) send to your respective legislators.
The best way to contact your respective legislators are to:
1) find out who represents you on the House and Senate Websites. 2) take that Legislator's name and find their respective website.
3) find their email or mailing address (whichever you prefer – I choose email).
The following is my suggested letter:
December 24, 2020
The Honorable [Insert Name]
[Insert Office Address]
[Choose One: United State House of Representatives/United States Senate]
[Insert City, State, Zip]
Dear [Choose One: Representative/Senator] [Insert Name]:
I am writing to you to express my concern regarding the potential overarching impacts from a recent lawsuit brought forth by the U.S. Securities and Exchange Commission (“SEC”) against Ripple Labs, Inc., Bradley Garlinghouse, and Christian A. Larsen (collectively “Ripple”). Specifically this lawsuit is an enforcement action against Ripple for the unlawful sale of unregistered securities.
This lawsuit seeks to have XRP registered as a security and therefore under the purview of the SEC. As a brief overview, XRP is the third largest virtual currency with billions of dollars in trading every day. Unfortunately, the SEC does not seem to understand that XRP is not an “investment contract”; XRP holders do not share in the profits of Ripple or receive dividends, voting rights or corporate rights. I would be more than happy to have myself, or a representative explain to you further just what XRP is (and what it isn't), and the true utility behind it if you so wish.
HOWEVER, this lawsuit has greater overarching concerns and impacts than just Ripple and XRP. In this instance, XRP and Ripple are merely “proxies” for basically every other virtual currency other than Bitcoin. If XRP is determined to be a security, this would mean a departure from the original intent and quite honestly application of the HOWEY test, as decided in the S.E.C. v. W.J. Howey, CO., 328, U.S. 293. There is no imaginable way that a 1946 lawsuit could have foreseen the applicability of this law and test towards virtual currencies. We live in a great country of innovation, and I fear the repercussions that could result if we allow antiquation to stifle innovation. If XRP is determined to be a security, this would lead us down a slippery slope where basically every other virtual currency may be deemed a security as well. The impact of such actions would (1) give the SEC greater power than was ever imagined, and (2) cause catastrophic effects in the virtual currency market. Unfortunately, the United States government has permitted the virtual currency market to continue unregulated to the point where the losses to the individual people involved will be substantial! Our government needs to find a way to right the wrongs that it has created.
In addition to the above, I would be remiss if I did not share with you the hypocrisy and great failures of the SEC to protect U.S. citizens in pursuing this action. The SEC’s mission statement is “to protect investors, promote fairness, and share information about companies . . . to help investors make informed decisions and invest with confidence.” Unfortunately, in this lawsuit, the SEC did the exact opposite. While they make allegations against Ripple for manipulating the XRP market (oddly without actually suing them for same), their actions in this case have caused the price of XRP to plummet from around $.58 to as low as $.21.
Most of the “alt-coin” market has plummeted with XRP.
The above seem fair given the allegations of XRP being a security, but the actions of the SEC speak volumes. In its complaint, the SEC alleges that Ripple has been selling unregistered securities from 2013-present (p.2). It further admits that it has at least known about the potential issue since April 1, 2019 (p. 67). However, it is easy to conclude that they have know about Ripple and XRP for far longer. This means that the SEC has allowed Ripple to sell what it believes to be unregistered securities for seven (7) years without letting the public know there may be an issue or at least an investigation.
Further, the SEC gave Ripple advance knowledge of its intent to bring the lawsuit, but did not make the American public aware of same. The CEO of Ripple, Brad Garlinghouse, announced the night before the lawsuit that the SEC would be filing suit. This announcement came after Brad Garlinghouse sent an internal email to Ripple employees to the same effect. This means that although the SEC alleged bad action against Ripple, they gave Ripple and its partners a head start and advance knowledge of the action BEFORE THE AMERICAN PUBLIC.
This begs the question: who is the SEC really protecting here? If they were protecting the American public why has seven (7) years gone by without a lawsuit or an announcement of an investigation? If they were protecting the American public, why are we the last to find out? If they are protecting the American public, why would they give the exact party that they allege to be acting in bad faith and manipulating the market advance notice so that they could potentially manipulate the market further before the American public found out? I do want to make it clear, however, that I am not alleging that Ripple in fact did this, but rather that the SEC opened the door for the American public to suffer greater harm than it already has.
Aside from a congressional investigation into the actions of the SEC and former chairman Jay Clayton (who I may add oddly resigned the following day – almost as if this was a vendetta or parting shot where he maintains no culpability), it is requested that you “take the ball out of the SEC’s court.” It is time for Congress to step up and regulate virtual currencies. Our country is falling behind the world on virtual currency regulation and this will result in stifled innovation. More importantly, without regulatory clarity, we risk pushing the innovation, tax revenue and jobs out of our country. We have a lot to lose. I urge that you support innovative legislation that allows our companies and institutions to use this technology to build and create responsibly.
Blockchain is the future. We can choose to be in the driver’s seat, or waiting on the curb hoping for someone to pick us up and give us a ride. The choice is yours. Please choose wisely.
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