John Berlau, a policy expert in financial services at the Competitive Enterprise Institute (CEI), has shared his thoughts on the recent court ruling regarding the legal battle between the Securities and Exchange Commission (SEC) and Ripple along with its founders. Berlau notes that XRP was the third largest crypto when the SEC decided it was an unregistered security – thus breaking securities law. This decision was made without any new rulemaking or a change in the law. Berlau says this action was “destructive to thousands of Americans who had XRP in their portfolios and to innovators facing uncertainty about [the] red tape from the SEC for the beneficial cryptocurrencies and blockchains they were developing.”
Berlau told CI:
“The decision by Judge Analisa Torres, an appointee of President Barack Obama, to void much of the SEC’s complaint puts some needed legal limits on the SEC’s ability to deem cryptocurrencies as securities. Judge Torres notes, as I have in my writings, that the SEC can’t deem an object as a security merely because some people purchase it for investment purposes. Otherwise, as she notes, the SEC could declare cars and horses as securities.”
Berlau says that Judge Torress gets it wrong on another topic by affirming the SEC’s charges against Ripple for its direct sales of XRP to institutional investors.
“If a cryptocurrency – like a horse or a car – cannot be deemed a ‘security,’ the SEC should have no jurisdiction until Congress says otherwise,” explains Berlau. “But overall, the greenlighting of XRP trading on crypto exchanges and platforms, which is already resulting in venues such as Coinbase relisting XRP, will have great benefits for American consumers, investors, and entrepreneurs.”
XRP almost doubled in value when the news came out and has now settled down – still trading significantly higher. Some observers believe the ruling will allow some crypto exchanges to list, or relist, the digital asset boosting overall market liquidity.
While the case continues in the courts, markets are viewing the decision as a significant win in its battle with the SEC.