Ripple: partial victory against the SEC

Ripple has broken through against the U.S. Securities and Exchange Commission in the legal fight over XRP, a win that could also benefit Ethereum.

Ripple has broken through against the U.S. Securities and Exchange Commission in the legal fight over XRP, a win that could also benefit Ethereum.

In the legal battle over whether XRP is a security, Ripple may have just secured a decisive breakthrough. The presiding judge is allowing a key speech by former SEC director William Hinman to be heard. In that speech, Ether was argued not to fall under securities law. Ripple could now stand to benefit.

Breakthrough in the XRP legal battle?

The case centers on a speech Hinman gave at the Yahoo Finance All Markets Summit in 2014. According to the then-SEC Director of the Division of Corporation Finance, "the current offers and sales of Ether are not securities transactions." Hinman cited the Ethereum network's "decentralized structure" as the justification. Applying federal securities law to Ether transactions would be "of little added value."

The SEC had previously objected to the judge's order to disclose internal documents related to this speech. The court has now rejected that: "The court overrules the SEC's objections and Orders the SEC to comply with the orders," reads a document from September 29.

The green light could be a decisive turning point in the nearly two-year-old XRP case, touching on the core question of how cryptocurrencies should be regulated in the U.S. Ripple also relies on the decentralized issuance of XRP tokens. If the court adopts Hinman's reasoning, the cryptocurrency could also fall outside securities law.

Precedent for the crypto industry

The outcome of this precedent-setting case could also have big implications for Ethereum. SEC Chair Gary Gensler recently highlighted the similarities between returns from betting and dividend payments. With Ethereum transitioning to Proof of Stake, Ether could be classified as a security, Gensler noted. If Ripple wins, those recent statements from Gensler could be called into question.

However, it remains unclear when a ruling will be issued. Recently, both Ripple and the SEC pushed for a swift resolution by requesting a summary judgment. The current document disclosures could further slow the stalled case.