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What Happens if the SEC Loses its Appeal Against XRP? Ripple’s legal Chief Weighs in

Published July 26, 2023 11:59 AM
Teuta Franjkovic
Published July 26, 2023 11:59 AM
Key Takeaways
  • The court could decide to further consolidate Ripple Labs’ partial victory over the SEC, according to Ripple’s CLO
  • Alderoty predicts that the SEC will lose every case in which it is suing to prove that cryptocurrencies are securities
  • If the SEC appeals the XRP decision, the former SEC chairman believes the commission will lose

The chief legal officer of Ripple decided to dismiss worries about a potential appeal by the US securities regulator (SEC) to the historic XRP decision earlier this month.

If the SEC files an appeal, according to Stuart Alderoty, the court might decide to further consolidate Ripple Labs’ partial victory over the banking agency.

Ripple Team is Not Backing Down

Alderoty repeated in a July 26 podcast  that the XRP token is not an investment contract and that the Ripple team would not back down from any legal action the SEC took, including the appeal.

“We think the judge got that right, and we think that was a faithful application of the law, and I think a court of appeals will not only affirm that but maybe even amplify that to even a greater extent,” he said.

CCN reached out to Ripple Labs for commentary but did not receive a reply at the time of publishing

On July 13, Judge Analisa Torres said that XRP can be classified as a security when offered to institutional investors but is not a security when sold to the general public on cryptocurrency exchanges.

On July 21, the SEC expressed its displeasure with the verdict through its ongoing legal battle with Terraform Labs’ founder, Do Kwon, and hinted that it would later appeal the split-decision result.

Respectfully, those Ripple decisions were incorrect, and this Court shouldn’t follow them, wrote SEC lawyers in a letter, arguing that XRP retail transactions should have been treated as securities.

“SEC staff is considering the various avenues that are available for further review and intends to recommend that the SEC seek such review,” the attorneys continued.

Gary Gensler, the chair of the SEC, also expressed his unhappiness with the court’s verdict regarding XRP and promised that the regulator would continue to review the decision.

He also recently argued for tens of millions of dollars in additional funding for his organization’s multibillion-dollar budget before the U.S. Senate Committee on Appropriations. Gensler resolutely told lawmakers the SEC must expand to, among other things, protect investors from a crypto industry “rife with noncompliance.”

SEC Could Lose All Lawsuits Insisting  Cryptos Are Securities

In light of the decision, Alderoty projected that the SEC would start losing ongoing lawsuits where it tries to argue that crypto assets are securities.

“Our case and the decision rendered by our judge [Torres] will comfort other judges that the SEC is just misguided.”

Despite his optimism, Alderoty cautioned that the crypto industry is still far from being on a firm regulatory footing. He criticized the SEC’s regulation by enforcement strategy for allowing the United States’ crypto laws to lag far behind those of other countries.

He stated that the United States still requires a logical, thorough, and intelligible regulatory structure for cryptocurrencies. “The United States has been clearly lagging behind the rest of the world because the SEC has refused to faithfully apply the law,” the SEC stated.

XRP is currently trading  at roughly $0.69, up nearly 43% in the previous month.

Ex-SEC Chairman Jay Clayton under Investigation

The former SEC Chairman Jay Clayton, who was instrumental in starting the litigation against Ripple before resigning, is one person who has drawn criticism in the wake of this decision. It’s interesting to note that Clayton seems to have disappeared from the public eye after XRP was declared to not be a security.

As a result, doubts have been raised and rumors circulated regarding his intentions and behavior throughout the case.

Attorney John Deaton’s Perspectives

The founder and host of the Thinking Crypto Podcast, Tony Edward, attracted attention to Jay Clayton’s absence. In response to Edward’s tweet, lawyer John Deaton clarified that neither Clayton nor William Hinman had made any remarks about the most recent Ripple ruling.

During his time as SEC Chairman, Clayton personally read Hinman’s “Hinman Speech,” a major speech that offered insights into the regulation of numerous digital assets.

By mentioning that Clayton allegedly met with Gary Gensler, the current SEC Chairman, the day before the complaint against Ripple was filed, Deaton raised questions.

The allegations in the case were criticized for being extremely general and claimed that the program code should be considered a security. These discoveries have raised questions about possible links between Clayton’s activities and his meeting with Gensler, raising questions about the lawsuit’s true motivations.

The Community Is Unhappy

The crypto community responded to remarks made by attorney John Deaton. Jay Clayton’s whereabouts have been questioned, and some have hypothesized that his absence is a result of humiliation related to the Ripple ruling.

Others voiced their displeasure with the regulatory framework, calling it “rigged.” While the decision provided solace to XRP backers and other stakeholders in digital assets, it has also called into doubt the SEC’s regulation strategy and expertise.

SEC Could Lose an Appeal

Recently, John Reed Stark, the former SEC’s Office of Internet Enforcement director, stated that the securities regulator could lose an appeal.

Stark brought up a recent instance in which the SEC had lost to the US Supreme Court. According to the expert, “SEC appeals are certainly rare and the SEC can certainly lose them.” He did, however, stress that the regulator tries to provide investors with a secure environment.

“Even when I vehemently disagree with them, SEC appeals are made in an effort to protect investors,” he declared.

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