Ripple picked up another procedural victory over the weekend in its ongoing legal battle with the Securities and Exchange Commission, which sued the crypto payments firm in 2020 over the $1.3 billion unregistered sale of XRP—a cryptocurrency originally created by the founders of Ripple.
On Thursday, a federal district judge canceled repeated attempts by the SEC to block Ripple from accessing internal SEC emails regarding key speech on the regulatory status of cryptocurrency competitor Ethereum. Ripple believes the emails will help its case and shed light on how the SEC has “picked two winnersin the crypto space, Bitcoin and Ethereum, while avoiding the rest.
The legal experts who spoke with Decrypthowever, doubted the significance of the decision and the likelihood that it would increase Ripple’s chances of beating the SEC lawsuit.
An examining magistrate previously granted Direct access to these emails, which contextualize a speech from 2018 in which former top SEC official William Hinman said Ethereum was not a security because it was “decentralized enough”. For months, however, the SEC attempted to conceal the documents from Ripple’s attorney; yesterday’s cancellation forced the agency to produce them now.
Within hours of the decision, the price of XRP jumped just over 15%, at $0.49. Ripple advocates celebrated the decision as a major victory not only for the company in its lawsuit against the SEC, but also for the crypto industry as a whole in its broader fight against government regulation.
This is why the crypto market should be grateful @Ripple is fighting this case. If you add up the legal fees Ripple paid to finally get a decision from Judge Torres, it’s probably $2-3 million and they still don’t have the documents. Next step: SEC request to certify or Mandamus. https://t.co/yXiUAoGNJA
— John E Deaton (216,000 followers, beware of imposters) (@JohnEDeaton1) September 29, 2022
“What Ripple hopes to find [in these emails] is a smoking gun, a juicy quote, that four years ago the SEC said ethereum was not a security and here’s the reasoning and if you apply that reasoning to XRP it’s not either security,” Adam David Long, a Web3 attorney, says Decrypt.
But Long thinks that even if such a smoking gun exists, its relevance to Ripple’s case is tangential at best.
“It will depend on what Ripple said and what people reasonably believed when they bought [XRP]”, Long said. “And what somebody debated internally at the SEC about a speech, I’m going to be surprised if that materially advances the case.”
Ironically, the language of Thursday’s decision granting Ripple access to these emails further weakens the potential legal significance of these internal SEC correspondences.
The federal district judge overseeing the lawsuit ruled yesterday that Ripple had the right to see the SEC emails in part because they would reveal Hinman’s personal views at most, and nothing related to “some form of agency position, decision or policy”.
“Why Ripple got the documents may be a reason why they are not helping their case,” said a law professor familiar with the case. Decrypt.
Mike Handelsman, a partner at crypto law firm Kelman PLLC, also expressed skepticism about the potential relevance of Hinman’s emails to the Ripple case.
“Hinman’s bias in favor of ETH does not seem relevant to the ultimate question in this case, whether XRP is a security,” Handelsman said. Decrypt.
If Handelsman thinks the Ripple community’s understanding of the significance of this week’s decision is flawed, that doesn’t mean he disagrees with their definition of what’s at stake in the case.
“The industry needs Ripple to win,” Handelsman said. “If the SEC is successful in this case, I expect the floodgates of enforcement to open. If the SEC loses this case, it will be quite a setback for them and their ‘regulation by enforcement’ plan. “.
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