SEC Predicted to Lose Lawsuit Against Ripple, Says Past SEC Executive

The Securities and Exchange Commission announced on the 22nd of Dec, 2020, that it had filed a case against Ripple Labs Inc and two of its executives, Brad Garlinghouse and Chris Larsen, asserting that they raised more than $1.3 Billion through an unregistered digital asset securities offering.

In the words of Stephanie Avakian, Director of the SEC’s enforcement division: 

We allege that Ripple, Larsen, and Garlinghouse failed to register their ongoing offer and sale of billions of XRP to retail investors, which deprived potential purchasers of adequate disclosures about XRP and Ripple’s business and other important long-standing protections that are fundamental to our robust public market system“.

Stephanie Avakian

The class action from SEC was met with pushback by Ripple in a 93 page filing stating that XRP is not a security nor investment contract and affirmed that the SEC did not inform them of any possible violation of the law.

Since then, different petitions have been submitted by both parties, and the ongoing battle has divided the financial community on the legitimacy of the commission’s allegation.

SEC Predicted to Lose Lawsuit Against Ripple, Says Past SEC Executive

Recent Development

Last week, the court approved the unsealing of Ripple’s 2012 legal memos that will shed more light on the agency’s XRP categorization when it was released to the public in 2012.

Meanwhile, while speaking on the Thinking Crypto podcast hosted by Tony Edward, Attorney John Hall, a former managing executive for policy at SEC, expressed sympathy towards Ripple’s due process argument and stated that he wasn’t sure of what the commission was trying to prove.

Hall stated:

“I’m not sure what the SEC is planning on proving through the XRP litigation either… I continue to be perplexed why the SEC decided to bring that case… Their entire regulatory project could be basically shut down, and I think there’s a pretty good chance that they will lose all their merits”.

John Hall

Relevance of the Lawsuit for the Crypto community

As it stands, many digital currencies are regulated through CFTC laws which are not as forceful as the regulations applied by the SEC.

If the SEC wins, they will have regulatory control over many of the currencies being traded today.

And if XRP wins the price of the token will almost undoubtedly shoot up as will most of the entire crypto market.

A lot is riding on the court judgement.