The decision ruled that Ripple Labs Inc. did not violate securities laws with its XRP sales. A cryptocurrency developer’s landmark legal win against the SEC will inspire businesses like Coinbase to resist the agency’s control. Other crypto firms are expected to follow suit. In a major setback, the SEC’s ten-year enforcement campaign against the crypto industry faced its first defeat.
The decision’s impact has prompted crypto businesses to explore ways to strengthen their defense against the SEC. They aim to capitalize on the ruling’s potential advantages. Gary Gensler, the SEC’s Democratic Chair, aims to gain control over the “Wild West” crypto industry. He considers most crypto tokens as securities. The SEC has targeted various crypto trading platforms, including Coinbase, to assert its jurisdiction over the sector.
The cryptocurrency industry had long questioned the SEC’s authority without legal backup before this decision. Industry lawyers now have a fresh line of defense to contest the agency’s actions thanks to the legal precedence. Unnamed sources suggest crypto exchanges may leverage the Judge’s decision. Robert Frenchman believes the case will prompt industry reevaluation.
The SEC sued Ripple and its officials in 2020, alleging that they sold $1.3 billion worth of unregistered securities through the sale of XRP. US District Judge Analisa Torres ruled that selling XRP on a cryptocurrency exchange didn’t constitute a securities offering. The buyers lacked a reasonable expectation of profit tied to Ripple’s activities. The judge’s decision resulted in a partial win for the SEC, stating that Ripple should have registered its direct sales of XRP to investors as securities.
Ripple Legal Victory Energizes Crypto Industry’s Defense Against SEC
As it creates a new line of defense for exchanges like Coinbase, Binance, and Bittrex-targeted by the SEC for dealing securities-crypto proponents hail this ruling as a major victory. The decision, in Teresa Goody Guillen’s opinion at Baker & Hostetler, strengthens the case against the classification of the digital assets exchanged on these exchanges as securities.
The cryptocurrency community is jubilant, but some industry insiders believe the SEC may appeal the decision to the 2nd US Court of Appeals to stop other courts from issuing decisions that support crypto assets being sold on exchanges as non-securities. Legal scholar Carol Goforth predicts the SEC will challenge the decision due to high stakes and ongoing litigation. An SEC appeal carries risks as it could limit agency authority over crypto markets in the 2nd Circuit. The Ripple case reasoning might apply.
Stuart Alderoty, Ripple’s chief legal officer, expressed readiness to file an appeal. He believes an appellate court would uphold the main conclusions of the ruling. The judicial decision boosts optimism and tenacity in countering the SEC’s encroachment on virtual currencies. The crypto industry’s tug-of-war with the regulatory agency continues.