Ripple General Counsel Stu Alderoty is calling out the U.S. Securities and Exchange Commission (SEC) for what he sees as deliberately muddying crypto regulations.
In a new commentary published for Fortune, Alderoty discusses the ripple effects of a speech made by William Hinman in 2018.
At the time of the speech, Hinman served as the Director of Corporate Finance at the SEC. In the speech, Hinman claimed Ethereum (ETH) was not a security, which some view as a contradiction to previously laid out SEC guidelines.
In Alderoty’s latest remarks, the Ripple general counsel argues Hinman’s speech had tangible effects on the crypto markets, intended or not.
“Despite disclaimers that the speech was Hinman’s personal opinion and ‘not necessarily that of the Commission,’ the market took Hinman’s speech to heart. For Ripple, Hinman’s speech affirmed the conclusion that XRP – a cryptocurrency that exists on an open, permissionless, decentralized blockchain ledger – was a commodity and/or a virtual currency. Certainly not a security.
Ripple uses XRP in its products as a bridge to make cross-border payments faster, cheaper, and more transparent for its customers – and is one of many developing on the XRP ledger. Following Hinman’s speech, Ripple met several times with key officials at the SEC, believing that rational minds would all agree on XRP’s status as something other than a security.”
Until recently, the ruling judge in the SEC lawsuit against Ripple considered Hinman’s speech personal opinion. However, as noted by crypto legal expert Jeremy Hogan, the SEC’s attorneys recently argued the purpose of the speech was to provide market guidance on how the Commission would treat digital assets.
“Now we know Judge Netburn has already ruled that, at least for discovery purposes, Hinman’s speech was his personal opinion. So the SEC can now argue it’s not relevant to anything, and that’s fine, but we know that now hurts the SEC in those discovery motions, so there was a trade-off there. But the SEC attorney was trying really hard today in arguing various positions in order to try to win this motion, which was probably not really possible to even win…
The judge asked, ‘Is the SEC taking the position now that the speech reflected the Division of Corporate Finance’s position?’ And the SEC attorney said ‘Yes.’ Now she tried to equivocate a little bit after that, but the first and the direct answer was ‘Yes.’”