Crypto: Firms facing U.S. SEC charges find hope in Ripple ruling

A landmark legal victory by a cryptocurrency developer against the U.S. Securities and Exchange Commission (SEC) has prompted Coinbase and other companies to resist the agency’s attempts to assert jurisdiction over the industry, according to experts. would inspire

Thursday’s ruling that Ripple Labs Inc did not violate securities laws by selling XRP tokens on exchanges marked the SEC’s first major setback in a decade of enforcement against the cryptocurrency industry. Other cryptocurrency companies accused of illegally operating digital asset exchanges are also exploring ways to take advantage of the ruling, they said, speaking on condition of anonymity because they are not authorized to speak publicly. Two people familiar with the matter said.

The crypto industry is in a tug of war with the SEC and its Democratic chairman Gary Gensler, who has described the crypto market as a “wild west” riddled with scams. The SEC is cracking down on crypto trading platforms, including top US exchange Coinbase, to bring the industry under scrutiny as most crypto tokens are securities.

Crypto companies have long challenged the SEC’s jurisdiction, but until Thursday there was no court upholding that view. Industry lawyers now have the ammunition to fight back.

“This case will make people change their minds, and I think it’s already happening,” said Robert Frenchman of Mukhersey Frenchman Law Firm.

For example, two sources said companies are looking at ways to use the judge’s ruling in their own defense. “I can’t imagine any exchange not utilizing this in some way,” said one exchange.

In 2020, the SEC sued San Francisco-based Ripple and its current and former CEOs for $1.3 billion in unregistration for selling XRP, which Ripple’s founders founded in 2012. He was sued for selling securities.

US District Judge Annalisa Torres of New York ruled Thursday that a sale on a public cryptocurrency exchange is not a security offering, and that buyers have reasonable expectations of profits to rely on Ripple’s efforts. Since it did not have XRP, it became an important factor in determining whether XRP was a security of Ripple. time. But she also gave the SEC a partial victory by ruling that Ripple’s direct sale of XRP to investors should have been registered as a security.

Crypto advocates saw the decision as a turning point, with the judge’s reasoning seen as a new line of defense against Coinbase, Binance, Bittrex, and other exchanges targeted by the SEC for trading securities.

“This confirms Coinbase and Binance’s contention that digital assets traded on these exchanges are not considered securities,” said Teresa Goody Gillen of Baker & Hostetler in Washington. rice field.

Spokespeople for Coinbase and Bittrex did not immediately respond to requests for comment. Neither Binance nor an SEC spokesperson declined to comment.

In a statement Monday, SEC’s Gensler said regulators were “disappointed” by some of the rulings in favor of Ripple.

Stock Exchange Appeal?

As the cryptocurrency world celebrates, some legal experts have scrambled to block a judge’s ruling hearing other lawsuits that other crypto assets sold on exchanges are not securities. said the SEC will challenge the ruling of the US Court of Appeals No. 2.

“The stakes are too high for the SEC to accept this opinion, especially considering the lawsuits against Coinbase and other issuers,” said Carol Goforth, a law professor at the University of Arkansas.

Ripple Chief Legal Officer Stuart Alderotti said in an interview with Reuters that the company “would not hesitate to appeal because the judge’s core findings were correct.” It would definitely be welcomed to uphold these decisions,” he said.

Experts agreed that an appeal would be risky for the SEC.

Seward & Kiesel Attorney Philip Mustakis said that if the Second Circuit, whose ruling is binding on federal courts in New York, Connecticut and Vermont, adopts the logic of the Ripple ruling, many of the Coinbase lawsuits ” It’s a complete blank slate,” he said.

“If we appeal and lose, there is a big risk that our jurisdiction over the cryptocurrency market will be restricted,” he said.

(Reporting by Jodie Godoy and Chris Prentice in New York; Hannah Lang in Washington, DC; Editing by Tom Hulce, Michelle Price, and David Gregorio)

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