On January 6, 2023, I published my annual industry forecasts where I highlighted the import of an impending court ruling that I predicted would “send ripple effects (pun intended) across the cryptocurrency industry and beyond.”
You may have gleaned from my pun that I was referring to the Securities and Exchange Commission v. Ripple Labs Inc. lawsuit (1:20-cv-10832).
The ruling, upon which the fate of an entire industry had been hinging, was finally delivered on July 13th. And, boy did it deliver!
The headline is that the judge ruled that XRP, Ripple’s native cryptocurrency, did NOT constitute a security when sold programmatically to the public via digital asset exchanges.
To make sense of the magnitude of this decision and to dissect the ruling, I invited Nick Morgan and Jorge Pesok onto the Decent Millionaire podcast.
Nick and Jorge are securities law experts and fellow board members of the Investor Choice Advocates Network (ICAN), a nonprofit public interest litigation organization dedicated to fighting SEC overreach. ICAN, a legal advocate and voice for small investors and entrepreneurs, had previously filed an amicus brief, on behalf of Ripple Labs which is well worth reading.
Anyone seeking to understand the widespread implications of this ruling should take the time to watch this enlightening video where some of the highlights include:
Why the industry should be celebrating this ruling;
Why, despite spinning this decision as a victory, the SEC will likely appeal it;
What the SEC’s spin says about the regulator’s true motives;
The timing of an appeal - whether there could be an interlocutory appeal or the SEC will have to wait until the trial concludes;
Why this case could very well end up in the Supreme Court;
How this decision could impact the SEC’s lawsuit against Coinbase;
How this decision could impact the SEC’s enforcement strategy going forward;
How litigating versus settling helps curb SEC overreach;
How XRP token holders helped deliver this favorable ruling;
What this ruling means for token issuers and airdrops;
Despite the ruling, why the industry should not expect digital asset legislation anytime soon.
A Special Message to Ripple Labs and its Legal Team:
I’d like to not only congratulate Ripple Labs and its legal team on this tremendous victory, but to also thank them for taking the more arduous legal path, and for their resoluteness throughout this ordeal.
Anyone who has ever been involved in a lawsuit knows how grueling litigation can be to both the wallet as well as the psyche. That is why even those with truth and law on their side so often settle. Regulators, particularly the SEC, use their settlements to go after an ever-increasing number of businesses and entrepreneurs. But settlements are not law and ruling by enforcement is not democracy.
Thank you for continuing to fight no matter how tempting it must have been, at times, to settle. You were not only defending yourselves, you were fighting on behalf of a nascent industry - without substantial means to litigate - that works tirelessly to improve global finance, broaden access to capital and narrow wealth gaps.
Your win is not just a win for cryptocurrencies, it is a win for innovation, progress and democracy.
The Court Ruling that Sent Ripple Effects Across the Cryptocurrency Industry