Ripple Labs has dealt a blow to the Securities and Exchange Commission’s (SEC) case after the presiding judge issued a judgement that one Ripple community lawyer describes as “a very important win for Ripple.”
In 2020, the SEC charged Ripple and executives Brad Garlinghouse and Christian Larsen with marketing unregistered securities.
Presiding Judge Sarah Netburn refused the SEC’s motion to reconsider hiding documents under privilege in connection with a lecture given by the SEC’s then-director William Hinman in June 2018. Hinman stated in his lecture that Bitcoin (BTC) and Ether (ETH) are not securities.
The SEC previously did not object to those materials falling outside of deliberative process privilege (DPP) protection because they appeared to concern Hinman’s personal views rather than SEC policy.
The DPP exempts some papers in a case from disclosure by the government so that it can discreetly assess existing policy based on the documents’ materials.
The SEC later revised its position, arguing that the speech reflected Ripple’s practices rather than Hinman’s personal opinions and thus should be protected.
Judge Netburn stated that the SEC should not contradict itself by attempting to change its position. She wrote in her decision:
“The SEC seeks to have it both ways, but the Speech was either intended to reflect agency policy or it was not. Having insisted that it reflected Hinman’s personal views, the SEC cannot now reject its own position.”
Despite this seemingly significant verdict, the matter is far from over, and the SEC now has two weeks to appeal the decision.
Much of the crypto industry is focused on the outcome of this case because it could determine the future of SEC complaints against crypto businesses for sales of unregistered securities.
If Ripple wins, the SEC may reconsider its aggressive litigation against the crypto industry. However, if the SEC prevails, the floodgates may open, and lawyers knowledgeable with cryptocurrency will have a cottage economy waiting for them.