Ripple vs. SEC: The Agency’s Actions May Backfire and Result in Supreme Court Intervention
As Paul Atkins is set to replace Gary Gensler at the SEC, a new warning from JW Verret suggests that the agency risks severe consequences if it doesn’t drop the Ripple case.
When the SEC launched its crusade against cryptocurrency, it didn’t expect to face resistance from the federal judiciary itself. Federal judges are now challenging the SEC’s aggressive interpretation of old securities laws, which could eventually prompt the involvement of the Supreme Court.
As we prepare for Paul Atkins to take over from @GaryGensler, a new piece by @JWVerret warns that if the @SECGov doesn’t drop the @Ripple case altogether, it’s courting judicial suicide https://t.co/RcPPV3EQQr — CryptoLaw (@CryptoLawUS) December 19, 2024
The dispute began with the SEC’s 2020 lawsuit against Ripple Labs, claiming that the XRP token was an unregistered security. However, Judge Analisa Torres ruled that XRP sales on public exchanges were not securities transactions, a decision the SEC is now appealing.
**Judge Jed Rakoff’s Interpretation Could Have Serious Consequences**
Judge Jed Rakoff took a broader view in the SEC’s case against Terraform Labs, suggesting that crypto tokens could be considered securities regardless of how they are sold. This difference in judicial opinions has created legal uncertainty, potentially leading the Supreme Court to intervene. Notably, Judge Rakoff’s interpretation could have serious consequences for the crypto industry. His view of the Howey test suggests that even trades of Luna tokens by individuals unrelated to Terraform could be considered securities.
**Lack of Boundaries Raises Concerns**
If this reasoning is followed further, even Bitcoin could be considered a security because its developers maintain the network. This could lead to a broad expansion of SEC control, affecting everything from precious metals to airline rewards programs. The lack of clear boundaries raises significant concerns among legal experts and market participants.
The SEC’s appeal of the Ripple case could lead to problems that could prompt the Supreme Court to step in. This case could be used to limit the SEC’s power, preventing the agency from making decisions without explicit approval from Congress.
**SEC’s Approach Could Backfire**
Coinbase is also battling the SEC, with the court questioning the SEC’s refusal to set clear rules for crypto trading, which could also lead to Supreme Court involvement. By applying the Howey test too broadly against legitimate crypto companies like Ripple, Coinbase, Kraken, and Uniswap without clear rules, the SEC risks limiting this important legal tool through Supreme Court intervention.
The SEC’s aggressive approach to cryptocurrency could backfire and undermine its own authority. By continuing its appeal in the Ripple case and failing to provide clear rules, the SEC may prompt the Supreme Court to limit its powers. This could weaken the SEC’s ability to regulate crypto and hinder its long-term goals, especially after the 2024 elections.
**Tags: Crypto news, Crypto Regulations**