The US Securities and Exchange Commission launched a lawsuit against Ripple and its co-founders, Brad Garlinghouse and Chris Larsen, in December 2020.
The SEC alleges that Ripple improperly traded $1.3 billion in its cryptocurrency XRP as security without alerting the commission.
Ripple and other parties have now alleged prejudice in the watchdog’s decision. Several important court proceedings have happened in the recent year, with both parties filing a succession of back-to-back petitions that were either granted or dismissed.
While the case has taken a lot of twists and turns since 2020, no significant judgements have been given. In any event, recent developments indicate that Ripple is now on the winning side, having won a series of major motions that might be critical in defending its fair motion argument.
Specifically, the court decided in favour of Ripple last week, unsealing two critical papers that the firm claims would provide certainty over how the agency classified XRP when it first entered circulation in 2012.
The Ripple Lawsuit: A Major Upset?
Now, in a recent podcast with Tony Edward of Thinking Crypto, Joseph Hall – the former SEC managing executive for policy — detailed the state of the case, how it has evolved so far, and what to anticipate going ahead.
“I’m not sure what the SEC is attempting to show in the XRP lawsuit either,” Hall said, adding that he is still perplexed as to why the SEC initiated the case in the first place.
He said that the Ripple network has been active for years previous to the last-minute filing of a lawsuit against them.
The implications for the SEC and the cryptocurrency industry as a whole are immense. According to Hall, the SEC “has a lot riding on this litigation,” and if they lose on the merits, their whole regulation endeavour may essentially “shut down.”
According to Hall, Ripple has a solid argument based on the SEC’s failure to provide adequate notice of its inquiry.
Individuals and companies are expected to be alerted when they are under regulatory scrutiny. Since the lawsuit’s inception, the XRP community has voiced outrage and anxiety.
According to Hall, the same is “quite compelling” and may be relevant to a judge, but may not necessarily serve as a “trump card.”
According to Hall, the SEC’s action against Ripple may not proceed as planned. In a lawsuit, a judge may only ask one question: “If you are aware that XRP is a problem and have been aware of it since 2012, why are you acting now?”
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