Last week, it was reported that Ripple had paid a $125 million penalty to settle an enforcement case brought by the Securities and Exchange Commission (SEC). Ripple, the issuer of XRP, was found guilty of selling unregistered securities, but the penalty was far smaller than the SEC wanted to punish the firm. Ripple CEO Brad Garlinghouse declared victory after the outcome was revealed.
The law firm of Seward and Kissel has distributed a note on the case’s results, calling the court injunction an “obey law” command. S&K explains that while there are no winners here and Ripple had to pay, the SEC “definitely did not win.”
The firm poses the rhetorical question of whether the SEC’s decision to lead with crypto enforcement on a non-fraud case was the correct move by the Commission.
The firm states:
“We are confident the zero in disgorgement, taken together with the penalty the Court imposed, was far south of anything the SEC would have accepted in settlement. The lesson for token issuers in registration cases may be to litigate rather than accept an untenable settlement, assuming they too have the resources for the fight. And the SEC did not obtain a judgment against the individuals, long a stated priority of its enforcement program.
It’s unfortunate that smaller crypto entrepreneurs and token issuers are generally not in a position to litigate against the SEC, like Ripple, because it creates an uneven playing field. It’s unfortunate also that—nearly four years after this case was filed—substantial uncertainty remains for the industry and investors when it comes to the securities law status of many token offerings as well as secondary market sales of tokens initially sold in ICOs or similar offerings.”
The current Commission has been criticized for pursuing losing cases while regulating by enforcement and swamping the staff with too many new rules. As Vice President Harris is trying to schmooze the crypto crowd, and former President Trump has declared himself pro-crypto, you can anticipate a big change in dealing with digital assets at the SEC following the upcoming election.