A federal court in New York has rejected Ripple Labs ‘proposal to order the US Securities and Exchange Commission (SEC) to show records of its employees’ crypto transactions in an attempt to prove that the agency did not consider XRP for a security.
Another point for the SEC, a federal court rejected Ripple Labs’ proposal
According to the official transcript, Ripple submitted the application on August 27. Their reason – if it were found that SEC employees traded in XRP, it would at least reveal the SEC’s past ambiguities about the nature of XRP and prove that the SEC did not previously consider XRP to be a security.
Defendants claim that individual business decisions at least reveal ambiguities about the status of XRP and whether the SEC believed that XRP was a security. Such evidence would likely undermine all SEC claims. The defendants claim that they have a right to know whether the SEC has allowed its employees to sell, buy and hold XRP “as market participants” during the relevant period.
But Judge Sarah Netburn disagrees with Ripple for several reasons.
First, it confirms the relevance of the SEC’s argument that “the pre-approval decision process does not involve any decision by the SEC’s ethics advisor that the transaction complies with securities laws.” The SEC Ethics Adviser has not proposed any provision explicitly relevant to XRP, so the business history of SEC employees is irrelevant to the present case.
Another key argument for rejection was, in essence, the lack of legal justification for approving Ripple’s claims. A federal rule protects SEC employees’ rights to privacy as U.S. citizens.
As for the annual statements requested by defendants, Congress would likely prohibit the disclosure of such financial information through federal data protection regulations to preserve the privacy of government employees.
Finally, the court explained that, in fact, the SEC had no business policy regarding digital assets during the period, so that its employees did not act in breach of the rules, even when dealing with cryptocurrencies.
This is the second similar victory for the SEC. Subsequently, the SEC requested access to Ripple’s internal communications via Slack. Ripple argued that producing such documents would be a long and costly procedure. That was not enough for the Court, which ultimately ruled in favor of the SEC.