Ripple Can Access Emails Regarding SEC Ethereum Speech, Judge Rules

Ripple won a court victory requiring the SEC to provide emails relating to a speech in which a former official decided Ethereum is not a security.

Ripple secured a significant procedural win in its dispute with the Securities and Exchange Commission on Thursday, when a federal court determined that the agency cannot argue that emails relating to a historic 2018 lecture regarding Ethereum are protected materials.

The speech in issue was made by William Hinman, a former senior SEC officer, who informed an audience that Ethereum was not a security due to its decentralised nature.

That speech has also been key to a legal action in which the SEC alleges that Ripple and its senior executives were aware that the blockchain’s digital currency, XRP, was a security that required registration with the agency but instead marketed it to the public.

Ripple has sought documentation regarding how Hinman determined Ethereum was not a security as part of its litigation strategy—material that might assist the firm refute the SEC’s accusations about the nature of XRP.

Thursday’s release included notes from the SEC’s crypto specialist, Valerie Szczepanik, regarding various SEC debates, as well as emails in which Hinman and others discussed a draught of the Ethereum speech.

Ripple CEO Brad Garlinghouse talks at TechCrunch Disrupt SF in San Francisco on September 5, 2018. Featured image courtesy of Steve Jennings/Getty Images for TechCrunch (CC BY 2.0)

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The SEC maintained that the records were protected by “privilege”—a legal term that refers to a party’s right not to discuss them with its adversary during litigation. The SEC asserted attorney-client privilege, as well as other types of privilege intended to protect government entities in specific circumstances.

United States Magistrate Judge Sarah Netburn agreed with the SEC on several papers but rejected the agency’s position on more than a dozen other batches. In the instance of the emails about Hinman’s speech, Netburn determined that the privilege did not apply since the speech was about his own opinions, not those of the agency.

“Although Hinman and the SEC acknowledge that agency employees discussed his speech, it seems that it was’merely incidental to real policy making,’ Tigue, 312 F.3d at 80, and not a ‘essential link’ in the SEC’s deliberative process regarding Ether, Grand Cent. P’ship, 166 F.3d at 482. As a result, communications about the speech or draught versions are not protected as pre- or post-decisional or deliberative agency materials.”

Netburn’s ruling provides Ripple with further ammo to wield in its legal defence as well as in the court of public opinion, where many—particularly in the cryptocurrency industry—believe the SEC has been too harsh on the business.

Nonetheless, the verdict is purely procedural and has no influence on the case’s central issue, which is whether or not XRP is a security.

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