It might finally be time to witness the final chapter of the SEC’s case against Ripple. After more than two years of discussions, a set of documents might signal an end to the back-and-forth between the crypto exchange and its supposed regulator. With the Hinman documents set to release imminently, legal experts predict a good chance for Ripple to get an outright win.
It’s been more than two years since the SEC filed a lawsuit against Ripple, a crypto exchange for allegedly illegally trading XRP, a cryptocurrency token that the SEC is adamant about identifying as a security. Earlier this year, Ripple, along with CEO Brad Garlinghouse called upon the Hinman documents to support his claim that XRP, among other crypto tokens, are not securities. After an attempt by the SEC to keep said documents sealed, their request was denied by United States District Judge Analisa Torres in a win for Ripple and the rest of the crypto market.
Additionally, the manner in which the SEC is labeling other cryptos, like ADA and SOL, as securities, hinges on the precedent set in the XRP case.
To catch you up, the Hinman documents refer to a series of messages that accompanied SEC’s former Director William Hinman’s speech, in which he stated that cryptocurrencies such as Bitcoin and Ether may start off as securities, but transition into commodities as they become sufficiently decentralized. Ripple is betting on these documents to argue against the SEC’s claim that crypto tokens are securities. While the documents would not immediately seal a win for Ripple, they definitely would tip the scales more in their favor.
When asked on Twitter for his thoughts on the imminent release of the Hinman documents, Ripple CEO Brad Garlinghouse said, “I believe they were well worth the wait.”
Wish I could go in depth now, but we’ve waited this long (18+ months), I don’t want to overstep… suffice it to say @s_alderoty and I believe they were well worth the wait.
— Brad Garlinghouse (@bgarlinghouse) June 12, 2023
In allegations filed in 2020, the SEC claimed that Ripple raised over $1 billion in 2013 through the sale of XRP in an unregistered security offering to investors. In response, Ripple claimed that XRP is not a security, also that SEC did not offer a fair notice.
Putting things in motion, in June 2021, the SEC requests an immediate hearing with a judge on the matter. The judge then provided an extension to the deadline upon which the SEC would disclose its internal crypto trading policies.
Naturally, Ripple relies on the argument that XRP is not a security, and that the SEC, under its current leadership, Gary Gensler is mistaken to identify it as such. And, that brings us to the Hinman documents, ones that Brad Garlinghouse and Ripple are using to prove their point.
Since United States District Judge Analisa Torres denied the SEC’s request to seal the Hinman documents, Ripple has been making leaps ahead with its own future. Since the decision, the company acquired Metaco for $250 million. The crypto custody startup would help Ripple regulate institutional trades of a wider range of cryptocurrencies.
The company also moved ahead with hiring ex-Amazon CFO and current Nielsen’s CFO Warren Jenson to serve as the new Chair of the Audit Committee. And, finally launched their Crypto Solutions for Business platform.
Should Ripple actually get an outright win against the SEC on their case, it would mean the SEC would have to admit that XRP is in fact not a security. That would open the door for many crypto exchanges that are currently at battle with the SEC to fortify their claims against similar allegations.
The top example of such exchanges is Coinbase. The biggest US-based crypto exchange was hit with a lawsuit by the SEC in early June. The SEC’s allegations claim that Coinbase was illegally operating as a trader of cryptocurrencies, such as Bitcoin which the SEC identifies as securities. That’s why if Ripple wins their case, it would open the door for arguing that not a single cryptocurrency should be considered a security, given it’s sufficiently decentralized. If that’s the case, the SEC could potentially lose all ground in their case against Coinbase.