As the crypto-sphere knows, last month Ripple/XRP received a partial victory against the Securities and Exchange Commission (SEC) in a court decision that determined that people who bought XRP could not reasonably expect Ripple to act to increase the price of XRP and the sales of XRP on public exchanges were not securities.
Yesterday, it was revealed that the SEC aims to appeal the decision by the court.
CI received several comments from crypto legal experts on the SEC’s decision to attempt to overturn the court’s decision.
Philip Moustakis, a partner at Seward & Kissel but formerly an attorney at the SEC, said that IF the appeals court adopts the logic of the Judge, making it binding, it “could put a big hole in the SEC’s case against Coinbase” (NASDAQ:COIN). The SEC has filed an enforcement action against Coinbase, alleging the company is transgressing securities law. Coinbase is a firm that was approved by the SEC to become a publicly traded firm.
Moustakis stated:
“…Or, at the very least, require the SEC to develop facts, in that case, concerning the relationship, if any, between the exchange and the issuer of tokens listed on the exchange and names in the complaint, and how each token was marketed to the public. But the opposite is true too. A contrary decision by the Second Circuit could really put Coinbase on its heels, at least in the short term, and drive other cryptocurrency exchanges to delist tokens or exit the United States.”
Jeffrey Alberts, a partner at Pryor Cashman LLP, said the SEC is desperate to avoid the implications of the judge’s ruling concerning the sales of digital assets.
“First, Judge Torres’s conclusions that digital assets such as cryptocurrency tokens are not themselves securities could severely limit the SEC’s ability to apply regulations to platforms that custody or facilitate transfers or exchanges of digital assets. “Second, Judge Torres’s conclusion that sales of XRP over public digital asset exchanges were not investment contracts could limit the SEC’s ability to regulate secondary market sales of digital assets, even though Judge Torres’s decision did not address secondary sales of XRP,” Alberts explained.
Finally, the judge’s conclusion that the sales of XRP were not investment contracts will make it harder for the SEC to regulate the distributions of digital assets by a company that created a digital asset – including bounty programs.
At the same time, if legislation is approved in Congress that creates granular rules for crypto, all of this could be moot. But then, the chances are currently slim that legislation will make it through the Senate.