The ongoing battle between fintech firm Ripple and the US Securities and Exchange Commission (SEC) may be over. However, according to legal experts, the regulator’s chances of victory are looming.
Crypto legal experts have indicated that the SEC may see a “hurtful defeat” in its case against Ripple. The ruling against the regulator could severely limit its ability to oversee regulation of the crypto asset sector. This would be a huge win for industry and innovation in America.
On October 30, senior analyst Roslyn Layton told Forbes: “If it ends like this, it will be a self-inflicted disaster from the start.”
The Ripple Fightback
The SEC took action against Ripple and two senior executives in December 2020. It accused the company of selling unregistered securities of its XRP tokens. Earlier this month, Ripple CEO Brad Garlinghouse called the reluctance of the SEC to hand over key documents “shameful.”
Ripple and token holders have been fighting for almost two years, and their case is getting stronger. In addition, over 75,000 XRP investors have joined in the amicus brief filing in support of Ripple.
“The SEC has no allies, not even its own expert witnesses, who have given ammunition to the defense,” Layton wrote.
Attorney Jeremy Hogan said the SEC can only win if Judge Torres, presiding over the case, “forgets his first year of law school.”
Other leading legal experts also agree that Ripple is on its way to victory. These include Kurt Levey of the Federalist Society and JW Verrett, a professor at George Mason University’s Scalia School of Law.
reversing the howe test
Verret said the SEC could appeal to the Supreme Court which is likely to be lost. This could completely reverse or eliminate the use of the Howe test to classify cryptocurrencies.
SEC Chairman Gary Gensler is using this test to emphasize that crypto assets are securities. The Howe Test, as defined in 1946, determines what qualifies as an “investment contract” and therefore a security. Contract is defined as “the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”
If the SEC declares that XRP is not a security, Ripple has agreed to settle and pay the fine. However, it seems that Gensler and co. They are determined to keep fighting even if it is a losing battle.
Ripple’s victory would not only increase the price of their tokens, but could also set a precedent that would prevent the SEC from mislabeling cryptocurrencies as securities and cracking them by enforcement.
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