A cryptocurrency Developer’s historic legal victory against the US Securities and Exchange Commission (seconds) will galvanize coinbase Experts said more other companies would resist the agency’s attempt to assert its jurisdiction over the industry.
Thursday’s verdict Wave Labs did not violate securities laws by selling its XRP tokens on exchanges, the first major blow for the SEC in a decade of enforcement against the cryptocurrency industry. Other crypto The companies accused of operating digital asset exchanges illegally are looking for ways to take advantage of the ruling, according to two sources familiar with the matter, who spoke on condition of anonymity because they were not authorized to speak publicly.
The crypto industry is at loggerheads with the SEC and its Democratic chairman, Gary Gensler, who has described the crypto market as a “Wild West” full of fraud. Stating that most crypto tokens are securities, the SEC has cracked down on crypto trading platforms, including top US exchange Coinbase, in an effort to bring the industry under its watch.
Crypto firms have long disputed the SEC’s jurisdiction but until Thursday no court had supported that point of view. Now, industry lawyers have ammunition to fight back.
“This case will force people to reconsider, and I think it has already done so,” said Robert Frenchman of Mukassi Frenchman LLP.
For example, two sources said the companies are considering ways to use the judge’s ruling to defend themselves. One said, “I can’t imagine any exchange not using it in some way.”
In 2020, the SEC sued San Francisco-based Ripple and its current and former CEOs, alleging that they offered $1.3 billion (roughly Rs. 10,664 crores) in unregistered securities by selling XRP, which Ripple’s Formed in 2012 by the founders.
US District Judge Analisa Torres in New York ruled Thursday that its sale on public cryptocurrency exchanges was not an offering of securities because buyers did not have a reasonable expectation of profit that Ripple’s efforts relied on, a key factor in determining whether whether XRP was a security. Time. However, he also ruled that Ripple’s direct sales of XRP to investors must be registered as securities, giving the SEC a partial victory.
Crypto proponents see the decision as a historic turning point and the judge’s argument as a new line of defense for those like Coinbase. binanceBittrex and other exchanges were targeted by the SEC on the grounds that they were trading securities.
“This strengthens Coinbase and Binance’s argument that digital assets traded on those exchanges should not be considered securities,” said Teresa Goody Guillen of Baker & Hostetler in Washington.
Coinbase spokesperson, bittrex And the SEC did not immediately respond to requests for comment. Binance declined to comment.
SEC appeal?
While the cryptoverse was celebrating, some legal experts said they believed the SEC would challenge the ruling in a second US appeals court to prevent judges hearing other cases from ruling that exchanges Other crypto assets sold are not securities.
“The stakes are enormous for the SEC to uphold this opinion, especially in light of the cases against Coinbase and other issuers,” said Carol Goforth, a law professor at the University of Arkansas.
Ripple’s chief legal officer, Stuart Alderotti, said in an interview with Reuters that the company “will not be deterred by an appeal, because the judge was correct in his original findings,” adding: “I believe that any appellate court will Will consider and enhance it. Support the decisions which will definitely be welcomed.”
Experts agreed that there is a risk to the SEC in the appeal.
If the Second Circuit, whose rulings are binding on federal courts in New York, Connecticut and Vermont, adopts the reasoning in the Ripple decision, much of the Coinbase case is “toast,” said Philip Mostakis, an attorney with Seward & Kissel.
“It presents a huge risk that if they appeal and lose, their jurisdiction over crypto markets will be limited,” he added.
© Thomson Reuters 2023