The Ripple lawsuit has been going on since 2020! The SEC has been doing their best to fight Ripple but Ripple Inc is a completely different entity than your average hedge fund bro. Honestly, SEC has a pretty extraordinary track record on winning legal cases. There are rumors flying around that SEC has only lost a handful of cases but it’s not true. Statistics aside, this time may be different for the commission. DeFi is definitely new territory for making legal cases and Ripple Inc is no ordinary DeFi platform. A new interview with Ripple CEO has shed light on the current situation.
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Federal Judge Says No to SEC! (April 15)
Recently, SEC made a request to withhold specific information in the form of internal email conversations regarding the Ripple lawsuit. However, a federal judge has turned down the request from U.S Securities and Exchange Commission (SEC).
Judge Sarah Netburn made an order to SEC to surrender the relevant drafts and messages related to the case. More specifically, information concerning a 2018 speech from the former director of Corporate Finance Division William Hinman.
Why is it so important? Well, Hinman has apparently said in the speech that Ethereum (ETH) is not a security. And of course, SEC has alleged Ripple Inc for selling XRP as an unregistered security. And it seems that the almighty regulators has failed to stay on the same page on an internal level when it comes to cryptocurrencies.
Initially, Judge Netburn made the order in January but the SEC made an objection. Subsequently, Netburn denied the regulator’s motion to reconsider the order. But, she did provide a legal clarification.
The Clarification (April 15)
“As discussed above, the question is whether any of the communications about, edits to, or comments on drafts of the Speech were not just related to specific deliberations facing the agency but comprised an ‘essential link’ in those deliberations. Having reviewed the documents, I find that, in general, agency staff communications about edits to the Speech—and the edits themselves—were not part of deliberations about how to communicate agency policy.
However, to the extent that there exist communications between staff discussing the Speech in the context of how it implicates other, separate agency deliberations—not deliberations about the content of the speech—the SEC may seek leave to redact those communications from its production. To give the SEC some guidance, comment 12 on page 6 of the Speech draft in Document J, which was submitted for in camera review, is the type of communication contemplated.”
At this point, SEC may appeal this decision which is of course a very likely decision. And of course, depending on which judge they get, this crucial piece of evidence can choose the fate of the Ripple Lawsuit.
Ripple lawsuit Delayed
The SEC filed a lawsuit against Ripple Labs in December 2020 in an effort to prove XRP being an unregistered security. On the other side of the spectrum, many believe that the Ripple is a threat to the international banking system. With that in mind, the SEC is doing what they always did, protect the banking industry.
To make your life easier, you can read our unbiased guide into “What is Ripple”.
All the drama aside, the SEC requested for an extra two months in order to gather evidence. The pre-trial discovery phase allows both parties to gather information and evidence to present in the court.
The SEC demanded the discovery phase to be extended until January 14th 2021 for “sufficient time to prepare rebuttal reports and depose a minimum of 14 expert witnesses.”
The Ripple Labs on the other hand called it an unfair request that prolongs the trial for Ripple Lawsuit.
“The SEC’s proposed deadline of January 14… would needlessly prolong discovery, despite both parties’ stated intention to resolve this litigation on an expedited timeline.” Says Ripple.
Ripple Army Be Mad!
Naturally, the latest request from SEC had the crypto supporters angry as it is interpreted as cheating. The SEC does not exactly have a great track record. Back in 2008, the SEC was the primary agency that could prevent the market crash by paying closer attention to the mortgage industry and the ridiculous CDOs (collateralized debt obligations).
We have previously discussed the details of the lawsuit and possible tactics the SEC could utilize.
The outspoken Attorney and crypto supporter Jeremy Hogan responded to the request on Twitter. He stated that granting this request would postpone the Ripple lawsuit to March or May of 2022.
Update on Ripple Lawsuit (March 7, 2022)
In a recent interview, Ripple CEO Brad Garlinghouse stated the the securities and exchange commission has a bumpy road ahead. Furthermore, Garlinghouse told Fox Business that the SEC essentially tricked them by changing their mind on XRP.
“The irony there is like we were in the SEC’s office. I met with Chairman Clayton. I was meeting with commissioners. No one ever once said, ‘Hey we think XRP is a security.’ They looked backward and say, ‘Now we think it’s all security.’ That’s a hard argument.”
Interestingly, Garlinghouse mentioned a point that may very well be the case for SEC. He argued that the SEC really does not know how “Crypto Really Works” and basically they are in uncharted territory. This lack of understanding has lawmakers baffled and of course caused platforms quite a bit of damage.
“I think it does a disservice to responsible actors like Ripple who are working with governments, with sanctions. Everything that is enforced from a sanction point of view through fiat currency, anything that Ripple does is enforced from the state in the exact same way. There’s no different level playing field. And in some ways, I heard Senator Warren saying things that felt like its holding crypto to a different standard, for example, expecting a blanket ban of all crypto in some of these countries… Well, you can still use PayPal. You can still use some of these other things, and I don’t think we should treat them differently.”
According to garlinghouse, Gary Gensler is still against crypto and seeing it as wild west. At this point, it is difficult to predict how much longer the case could take. Having said that, despite SEC’s resilience, Ripple may have a solid chance of winning their case. Primarily, the nature of this lawsuit is unfamiliar to both lawmakers and the SEC. In that regard, the odds are against SEC.
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