Ripple Labs’ recent victory against the United States Securities and Exchange Commission (SEC) is being hailed as a significant blow to the regulator’s “war on crypto.” However, legal experts caution that it is not a definitive victory for the industry as a whole.
In a landmark ruling on July 13, Judge Torres determined that XRP, the digital asset associated with Ripple, is not a security when sold to the general public. This decision sparked jubilation among XRP token holders and led to a substantial surge in the token’s price. Industry leaders applauded the ruling, believing it would provide support for crypto exchanges Coinbase and Binance in their ongoing lawsuits.
Luke Martin, the founder of crypto investment firm Venture Coinist, highlighted that a key aspect of the SEC’s claims against Coinbase and Binance is that they facilitated the sale of unregistered securities on their platforms. With the SEC losing this argument in the XRP case, Martin believes it deals a significant blow to the regulator and its chair, Gary Gensler. He described the decision as “inconceivably bullish” for the crypto industry.
Pro-XRP lawyer John Deaton echoed this sentiment, identifying Coinbase as another “winner” from the ruling and suggesting that altcoins would also benefit. Tyler Winklevoss, CEO of cryptocurrency exchange Gemini, went as far as to say that the ruling “decimates” the SEC’s case against Coinbase. Cameron Winklevoss, his twin brother, referred to the decision as a “watershed moment” that would make it challenging for the SEC to assert authority over cryptocurrencies. Consequently, Coinbase, Kraken, and iTrustShares have already relisted XRP on their platforms following the ruling.
Lawyers warn there’s more to Ripple’s win than meets the eye
Despite the positive outcome for XRP, several digital asset lawyers urged caution and advised against premature celebration. Stephen Palley, a partner at the law firm Brown Rudnick, pointed out that the summary judgment is only “partial” and that Judge Torres’ ruling does not establish a precedent. Instead, it may serve as persuasive commentary for future courts to consider, but it is not binding.
Palley and others also highlighted the possibility of the SEC appealing the decision, which could result in higher courts overturning Judge Torres’ rulings. However, Justin Slaughter, Paradigm’s policy director, and a former SEC adviser, believes that even if the SEC wins at the appellate level, it may face challenges at the Supreme Court. Slaughter noted that the Supreme Court has shown hostility towards agencies in recent times and is unlikely to miss an opportunity to cite a Democratic judge’s ruling to question a major agency’s actions.
Furthermore, Ripple will still need to address the SEC’s claim that Ripple CEO Brad Garlinghouse and co-founder Chris Larsen “aided and abetted” the institutional sale of XRP. U.S. lawyer James “MetaLawMan” Murphy emphasized this aspect, as the SEC alleged that $728 million worth of XRP was sold through institutional sales. Commercial litigator Joe Carlasare criticized Garlinghouse, accusing Ripple of making $700 million in unlawful profit.
