Ever since the US Securities and Exchange Commission sued Ripple Labs over selling unregistered securities in the form of their cryptocurrency XRP, the financial community has remained divided over the credibility of the watchdog’s allegations. The case has since 2020 seen a number of twists and turns, even as any substantial rulings over the same are yet to be made.
However, the most recent developments have suggested that Ripple might be on the winning side for now, as it won a number of key motions that could be critical in proving its fair motion defense. Namely, the court ruled in favor of Ripple last week to unseal two key documents that the company claims will shed light on how the agency classified XRP back in 2012 when it first came into circulation.
In a recent podcast, attorney Joseph Hall, who specializes in capital markets and digital assets, expressed sympathy towards Ripple’s due process argument, which claims that the company was not given fair notice that its actions were deemed illegal even as it had been in operation since 2012. He added,
“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 they lose all their merits here, and I think there’s a pretty good chance that they will lose all the merits.”
Whom the case turns in favor of is yet to be seen, however, as the preceding months have mostly been marked several discovery disputes and delays from both parties, which Hall referred to as “little skirmishes” in the bigger scheme of things as any major rulings have yet come out.
It should also be noted here that the case has now become bigger than the two parties involved, as over 65,000 XRP holders have also joined the proceedings under attorney John Deaton. About the same, Hall noted,
“It is pretty compelling that the investors themselves are showing a lot of unhappiness and concern here… Its something that could matter to the judge but I don’t think the anger of the XRP community is going to have any sort of deciding role in what the judge determines.”
Instead, judgments will be reliant on the 1946 Howie test, which is the basis of American securities laws and determines whether an asset can be considered a security or not. While Hall believes that these should not be applied to digital token distribution, he added that the SEC can’t be blamed for their aggressive approach “because this is what they are signed up to do.”
Moreover, there is always the threat of retaliation from Congress if things go south in the crypto market, the lawyer added.
Nevertheless, he opined that “substantial action over the course of this year” can be expected in the case since the discovery phase is at its end. However, since litigation moves slowly, and appeals can be expected on the district level where the case is being fought, reaching a resolution this year would be highly unlikely according to Hall.
Unless, of course, both parties agree to a settlement, which also seems unlikely at the moment as the SEC continues to safeguard documents it has been ordered to reveal by the court, Deaton had claimed earlier.
I stand by what I said long ago. There won’t likely be serious settlement talks until the SEC must turn over the documents. Can both sides evaluate the strength and weaknesses of their perspective sides? Absolutely. How does Ripple evaluate w/o all the evidence? Is XRP in doc’ts?
— John E Deaton (@JohnEDeaton1) February 20, 2022