Days after accusing the SEC of being an “overzealous traffic cop,” Representative Ritchie Torres, D-N.Y., has penned his second letter to the regulator calling for an overhaul of crypto regulation. This time, his focus is on Ripple and its recent summary judgment win.
In the letter, addressed to SEC Chair Gary Gensler and dated Tuesday, Rep. Torres says he is “writing to inquire if the SEC intends to come to terms with the folly of the Commission’s crusade against crypto assets in light of the latest decision by Judge Analisa Torres of the Southern District of New York.”
“Needless to say, regulation by enforcement had a dreadful day in court,” he added, referring to Judge Torres’ ruling that programmatic sales of XRP do not constitute securities sales.
The partial summary judgment in the SEC’s case against Ripple came last week. Judge Torres sided in part with the SEC, declaring Ripple’s institutional sales of XRP were securities, but the win for Ripple in the matter of programmatic sales was a big blow to the SEC’s case.
Industry members say the ruling not only undermines Ripple’s charges, but it also challenges the regulatory agency’s philosophy under Gensler.
“The ruling reinforces that regulatory agencies are not the judge, jury, and executioner when it comes to digital assets,” Ryón Nixon, founding partner of Horizons Law, told Blockworks. “That said, it’s only a first step. Appeals will almost certainly follow, and even this ruling doesn’t address many other important issues.”
Rep. Torres appears to agree. In his Tuesday letter to Gensler, he calls the SEC’s application of the Howey test, known as the legal gold standard in determining whether an asset is a security, is “sloppy.” The representative urges the SEC to reconsider the use of the Howey test, as the summary judgment points out that it places too much emphasis on needing to “prove the presence of an ‘investment contract.’”
“The latest court decision establishes a clear rule that should bear the name of Judge Torres, who has brought long overdue legal clarity to the chaos of crypto regulation,” Rep. Torres wrote. “The Torres Doctrine, as I call it, holds that crypto assets are not securities in themselves but can be sold as part of investment contracts, which do qualify as securities under the Howey Test.”
Rep. Torres sent his previous letter to the SEC just five days ago, in which he accused Gensler and his team of “politicizing” the registration process by approving crypto exchange Prometheum for a special purpose broker dealer license — a privilege the commission has granted to no other exchange.
In Tuesday’s letter, Rep. Torres asks the SEC to reconsider their current approach and prioritize giving the agency the clarity and fair notice he says it deserves.
“I look forward to finding out how the SEC will reassess its regulatory assault on crypto assets in light of the Torres Doctrine,” Rep. Torres concludes the letter.
