Ripple’s Ongoing Battle with the SEC: A Comprehensive Update
The past few months have been tumultuous for Ripple, the company behind the XRP cryptocurrency, as it faces a lawsuit from the US Securities and Exchange Commission (SEC). The regulator filed the lawsuit against Ripple, its CEO Brad Garlinghouse, and its co-founder Chris Larsen in December 2020, accusing them of illegally selling unregistered securities.
Since then, there have been a series of developments, countersuits, and even some predictions of an end date to the lawsuit. Here’s a comprehensive update on the situation thus far, and what might be expected in the coming months.
The SEC Lawsuit
The SEC claims that Ripple, along with Garlinghouse and Larsen, has participated in an ongoing unregistered securities sale since its inception in 2013. By offering XRP tokens to investors, the SEC alleges that Ripple raised more than $1.3 billion through an illegal securities offering. This is due to the agency considering the XRP token to be a security and not a currency, therefore requiring it to be registered under federal securities laws.
In response, Ripple has claimed that the SEC’s lawsuit lacks legal and factual basis and is a direct attack on the entire cryptocurrency industry. Ripple argues that its XRP token should be classified as a currency, similar to Bitcoin and Ethereum. Thus, the sale of XRP would not be subject to the same securities laws as stocks or bonds.
Ripple’s Legal Team
Ripple has assembled a robust legal team to fight the SEC’s allegations consisting of experienced attorneys who have previously worked for the regulatory agency. This team includes the former SEC Chair Mary Jo White, former SEC enforcement director Andrew Ceresney, and Kellogg Hansen partner Matthew Solomon.
The legal team is expected to defend Ripple on various grounds, such as the SEC’s lack of clarity surrounding the classification of digital assets as securities, Ripple’s efforts to cooperate with the SEC in the past and its commitment to market transparency, and the lack of historical precedent classifying other cryptocurrencies as securities.
Internal SEC Documents on Cryptocurrency Classification
Ripple’s legal team filed a request for the SEC to hand over internal documents that may reveal the rationale behind the agency’s decision to determine XRP as a security. The court granted this request, leading the SEC to hand over internal communications discussing whether Bitcoin, Ethereum, and XRP tokens are securities.
The release of these documents could potentially have a significant impact on the case, as Ripple could use them to expose alleged inconsistencies in the SEC’s treatment of cryptocurrencies, disprove the agency’s claims, or highlight the lack of regulatory clarity surrounding cryptos.
Independent Access to Ripple’s Documents
A discovery dispute occurred between the SEC and Ripple, in which the SEC sought to gain access to Ripple’s legal memos through the court. The regulator claimed that these documents might reveal the legal advice Ripple received in the past concerning the status of XRP as a security.
However, the court denied the SEC’s request, citing attorney-client privilege, which restricts the access to these documents. This represented a significant win for Ripple and its legal standing.
Predictions on the End Date
Given the high stakes involved and the potential consequences for the broader cryptocurrency market upon either Ripple’s victory or defeat, there has been much speculation about the potential end date of the lawsuit. Ripple’s legal team has made predictions based on their strategy, claiming that the case could settle or reach a judgment by September 2021.
The SEC’s recent extension request might push the end date further to early 2022. The delay is primarily attributed to the amount of discovery material that has been collected and must be reviewed, slowing the case’s progression.
Factors That Could Determine the Outcome
Several factors might determine the final outcome of the Ripple-SEC lawsuit. These include the classification of XRP as a security or currency, which will depend on whether the court determines that Ripple marketed XRP as an investment contract or as a medium of exchange. The release of internal SEC documents and their implication on the regulator’s stance towards cryptocurrencies could also play a significant role, potentially undermining the agency’s case.
Additionally, any settlements made between the SEC and other cryptocurrency companies could set a precedent and influence the Ripple case. For example, if the SEC chooses to settle its ongoing lawsuit against the founder of the cryptocurrency exchange BitMEX, the terms of that settlement could provide a framework for a potential deal between the SEC and Ripple.
The SEC’s lawsuit against Ripple is undoubtedly shaping up to be a landmark case for the cryptocurrency industry, with wide-ranging implications for digital assets and their future regulation. As the legal battle progresses over the remaining months, market watchers and cryptocurrency enthusiasts will be closely following the developments, eager to see how events unfold and impact the broader crypto landscape.
