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New York Democrat Ritchie Torres has escalated his criticism of the U.S. Securities and Exchange Commission (SEC) for failing to issue “any clear guidance” to the crypto industry after the agency lost its legal battle to Ripple Labs on multiple fronts.
“Regulation by enforcement had a dreadful day in court,” Torres wrote in an open letter to SEC Chairman Gary Gensler on Tuesday. His framing echoes a longtime criticism of the SEC’s approach to crypto from both industry leaders and fellow congress members.
Last week, the judge overseeing SEC v. Ripple Labs issued a summary judgment ruling that the firm’s cryptocurrency, XRP, is not a security, nor are sales of the token on secondary markets like crypto exchanges.
Torres said Judge Annalisa Torres’ reasoning reflected a “rigorous application” of the Howey Test, a legal standard for identifying securities which, in his view, the SEC has applied “sloppily.”
“Judge Torres has made it crystal clear to the SEC that digital assets are not securities in the abstract and that it lacks the legal authority to regulate digital assets untethered from an actual security offering,” the congressman wrote.
On Monday, Gensler said he was “disappointed” in the judge’s ruling, and that the commission is “looking at it and assessing that option.” However, Torres asserted that the SEC’s odds of scoring an immediate appeal on the ruling are “vanishingly small,” since some issues in the case will require fact-finding, which takes time.
In the meantime, the precedent set by the judge—which the congressman calls the “Torres Doctrine”—will reign supreme.
“The tenuous legal foundation for the litigation against Coinbase has come crashing down, and rightfully so,” argued Torres. In its lawsuit against Coinbase in June, the SEC deemed a host of other top crypto assets as securities, including Cardano (ADA), Solana (SOL) and Polygon (MATIC).
“I look forward to finding out how the SEC will reassess its regulatory assault on crypto assets in light of the Torres doctrine,” concluded the congressman. Torres did not immediately respond to Decrypt’s request for comment.
Torres’s letter follows an equally critical take by Inspector General Deborah Jeffrey and Comptroller General Gene Dodaro on Thursday, which called for an investigation into the SEC’s “unusual” approval of the crypto broker-dealer “Prometheum.”
The politician insisted that the approval was a mere case of propaganda theatre, creating the illusion of regulatory clarity while the path to registration was, in reality, a “bridge to nowhere” for other firms.