Crypto investors in the market are eagerly waiting for the outcome of the much-heated Ripple vs SEC case which many anticipate shall arrive by the first half of 2022. As of now, Ripple holds the edge as it continues to hold score more points against the SEC.
WSJ reporter Dave Michael writes that this case could prove to be a landmark for the crypto space. Michael writes that this will surely bring more regulatory clarity for token issuers as it will help to classify when can cryptocurrencies be classified as securities.
Some of the crypto market participants have been complaining the regulators have gone too far in cracking down on unregulated crypto products. the SEC says that Ripple has illegally raised $1.4 billion through the sale of the XRP tokens by violating the security law and investor protection rules.
However, if SEC manages to win this case, expect the securities regulator slapping more investor protection rules on the crypto market. However, a Ripple win will force the Congress to reflect upon clear rules without stifling innovation. Katherin Dowling, general counsel of Bitwise Asset Management said:
“Either way we are going to have an opinion that would be used by other players in the space to inform how they act and decisions they make”.
| The Exchange of Legalities
The SEC has argued that the use of XRP as a “security” never materialized in the first place. The SEC further argued that Ripple touted the use of XRP for commercial purposes, however, it disclose that it paid a money transmitter to use the coin. The SEC said that the money transmitter sold the digital coins which gave a false appearance that XRP was in greater demand.
On the other side, Ripple has fought aggressively seeking records about the Hinman confession that noted that the regulator had themselves allowed its staff members to trade XRP. The SEC has denied the access to the document citing the matter of confidentiality.
However, in January, the judge ruled in favor of Ripple asking the SEC to share drafts and emails relating to Hinman’s speech. Martin Flumenbaum at attorney at Paul, Weiss, Rifking, representing Ripple founder Chris Larsen said:
“We believe the record is clear that XRP is not a security and that the SEC does not have jurisdiction over the matter”.
Owing to the current case, the SEC has also been lobbying in the Congress to give the securities regulator higher rights over regulating the crypto space.