Smoother waters ahead as SEC officially ends Ripple rift?

Ripple's long running saga at the hands of the US Securities and Exchange Commission (SEC) has finally come to a close. The case first began in 2020 with the SEC alleging that Ripple's original sale violated US securities laws. Both Ripple and it's CEO and Chair were sued. In October 2023 the claim against the CEO and Chair personally was dismissed.

The case has been closely watched, with a judgment in 2023 finding that the XRP tokens were not securities under US laws, but that certain sales of XRP to investors were investment contracts (and that some programmatic sales were not) that secondary sales of XRP were not covered by US securities laws. Specifically, the Court said those "Programmatic Sales" were:

blind bid/ask transactions, and Programmatic Buyers could not have known if their payments of money went to Ripple, or any other seller of XRP.

A key treatise by Lewis Cohen and others called 'The Ineluctable Modality of Securities Law: Why Fungible Crypto Assets Are not Securities' set out the position regarding tokens themselves not being securities and aligns with the case and the direction of crypto regulation globally.

An attempt by the SEC to appeal the parts of their decision that went against them was dismissed, but Ripple was ordered to pay a US $125M penalty for their violation of US securities laws. Ripple appealed that decision and since the Trump Administration has brought a pro-crypto position to the USA and the SEC has changed focus the parties have been trying to settle, but an agreement reached in June was rejected by the Court. Subsequently a joint stipulation was filed leaving the original judgment intact and ending the various appeals.

Pro-crypto SEC Commissioner Hester Pearce said the end to this litigation was:

A welcome development for many reasons, including that minds once occupied with litigation now can concentrate on creating a clear regulatory framework for crypto

The closing of this crypto chapter, and a focus on fit-for-purpose rules, such as the GENIUS Act and market structure legislation currently in the US Senate are extremely positive signs for the crypto industry in the USA, and around the world. Debate continues as to which form of law is superior, and discourse over the correct way to define tokens at law continue. What remains clear is that token issuers need competent legal advice and an international structure to access the global marketplace, and be nimble while global crypto regulations continue to be developed.

By Michael Bacina and Steven Pettigrove