Ripple’s legal chief criticizes the SEC for using a “fabricated” term in crypto cases

Ripple’s Chief Legal Officer Stuart Alderoty has publicly criticized the US Securities and Exchange Commission (SEC) for its use of the phrase “crypto-asset security”.

In a post published on his official X account, the lawyer argued that the term is an invented concept that has no legitimate basis.

Lawyer, court, commission of appeal for the use of the phrase

In addition, Alderoty accused the financial watchdog of using words to mislead judges and the public in its legal actions against the crypto industry.

“The term ‘crypto-asset security’ is nowhere to be found in any statute; it is a manufactured term with no legal basis,” the lawyer stated in the September 2 social media post. “The SEC needs to stop trying to mislead judges by using it.”

His comments came after the regulator, in an Aug. 30 filing, warned it could challenge any plans by defunct crypto exchange FTX to use stablecoins to pay creditors. He claimed that the exchange’s wallet contains “crypto-asset securities,” a term Ripple’s counsel argues has no legal definition.

Alderoty’s reprimand is not the first time the agency’s use of the controversial phrase has been called into question. Recently, a California court expressed similar sentiments in a case the Commission brought against crypto exchange Kraken. At the time, the court expressed concern, describing the term as “unclear at best and confusing at worst.”

Highlighting the inconsistencies of the SEC

The lawyer has repeatedly pointed out the inconsistencies in the regulator’s stance on the status of various digital assets.

Not long ago, Wells issued a notice to the OpenSea NFT marketplace, indicating a potential lawsuit because some NFTs sold on the platform could be considered unregistered securities. Alderoty challenged the agency, saying it had previously decided not to pursue enforcement action in a case eerily similar to OpenSea’s.

According to him, 48 years ago, the Commission ruled that art galleries, even when promoting and selling to buyers with investment motives, did not need to be registered. He argued that this precedent should be extended to digital assets, where the intention is to encourage innovation and creativity rather than adhere to outdated regulatory frameworks.

The SEC’s actions have sparked a broader debate within the crypto community about the need for clear and consistent regulations. Many industry leaders, including those at Ripple, argue that the approach to financial surveillance, which is often based on enforcement rather than clear guidelines, creates uncertainty and stifles innovation.

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