The U.S. Securities and Exchange Commission is trying to block XRP holders from joining as a third party in the SEC lawsuit against Ripple Labs, according to a new court filing.

In a March 26 letter to U.S. District Judge Analisa Torres, the SEC argued that XRP holders should not be permitted to intervene in the lawsuit due to statutory and sovereign immunity considerations. 

“Congress has barred by statute the consolidation or coordination of claims without the SEC’s consent, and sovereign immunity bars Movants’ claims against the SEC,” the SEC wrote. 

XRP holders fail to meet the requirements for intervention, asserted the SEC. “Courts in this District that have considered applications to intervene in SEC enforcement actions have generally ruled against intervention, noting that the SEC is capable of adequately protecting investors’ interests and that investors have no legally cognizable right to direct the SEC’s litigation of an action to enforce the federal securities laws,” the SEC added in its letter to Torres, a judge in the Southern District of New York. 

The SEC also contended that “permissive intervention” by the court was “strongly disfavored in SEC actions and not warranted.” All other XRP holders, including investors who had already sued Ripple for unregistered offers and sales of XRP securities would likely seek to intervene too, added the SEC, and this could lead to an “avalanche” of claims and “near-certainty of undue delay, complexity and confusion.”

See related article: SEC: no duty to warn about XRP; denies Ripple’s fair notice defense

Last December, the SEC filed a lawsuit against Ripple, alleging that its sale of XRP was an unregistered securities offering worth over US$1.38 billion. The SEC also named Ripple’s executive chairman Chris Larsen and CEO Brad Garlinghouse as co-defendants for allegedly aiding and abetting Ripple’s violations and making US$600 million in personal profits from their unregistered sales of XRP.

The SEC’s letter was in response to a pre-motion letter filed on March 19 by attorney John Deaton, on behalf of XRP holders, seeking to intervene in the SEC’s lawsuit as a third party in order to ensure that the interests of XRP holders were “fully and vigorously defended.” The request is now pending the court’s decision. 

“Because the SEC is alleging that today’s XRP constitute investment contracts in violation of U.S. Securities laws, the vast majority of U.S. Exchanges have either delisted XRP or halted trading of XRP, including the XRP owned by XRP Holders who have no connection whatsoever to Ripple or its two executives,” Deaton said in the letter. XRP holders had suffered economic damages estimated at US$15 billion, he added. 

See related article: XRP holders seek to join Ripple in fighting SEC lawsuit

Deaton took to Twitter to respond to the latest legal volley by the SEC.

“The SEC claims if the Judge lets #XRPHolders intervene she will be forced to allow the XRP investors that sued @Ripple in a class action claiming that Ripple sold #XRP as an unregistered security,” Deaton tweeted. “This is nonsense because we aren’t arguing that against Ripple — in fact — we argue the opposite – that #XRP IS NOT a security and, therefore, those other investors that sued Ripple have no similar position or interests as us. The SEC doesn’t want us in.”

In contrast to the SEC’s response, Ripple’s attorneys expressed that they had no objection to the intervention by XRP holders, according to a separate legal filing on March 26.

See related article: Ripple: SEC did not give fair notice that XRP violated law

“Defendants take no position at this time as to whether intervention or some other, more limited, participatory rights — such as “elevated amicus status” — are appropriate,” stated the joint letter from the attorneys representing Ripple Labs, Chris Larsen and Brad Garlinghouse.

“The SEC now has a chance in the face of the putative Intervenors’ Letter to confirm that its suit is not intended to affect the secondary retail market for XRP in the United States,” Ripple’s lawyers added, in their letter. 

The SEC v. Ripple lawsuit is being closely watched by the cryptocurrency industry given the potential impact on XRP investors and the legal precedent it could set for other cryptocurrencies. Following the SEC’s lawsuit, major cryptocurrency exchanges, including Coinbase and Kraken, delisted XRP trading services for U.S. residents, which sent XRP prices tumbling. The hashtag #RelistXRP has been trending on Twitter in recent days due to efforts by the XRP community to pressure exchanges to relist XRP. 

See related article: Ripple recasts embattled XRP as a ‘bridge’ currency for CBDCs

Despite its legal troubles in the U.S., Ripple continues to enjoy strong support in parts of Asia, including Japan. The company has been ramping up its efforts to scale its payments business and the use of XRP as a “neutral bridge currency” for central bank digital currencies.

XRP is the seventh largest cryptocurrency in the world with a market capitalization of more than US$25 billion. The price of XRP has increased by almost 20% in the past two weeks and is currently trading at US$0.56 as of publishing time, close to the level in December before the SEC’s lawsuit.