A Recap of the Judge Torres’ Landmark Ruling in SEC vs Ripple
On 13 July 2023, a significant ruling was delivered in the ongoing SEC vs Ripple Labs lawsuit. The U.S. Securities and Exchange Commission (SEC) had accused Ripple Labs and its two senior executives, Bradley Garlinghouse and Christian A. Larsen, of unlawfully offering and selling securities. The case was presided over by Hon. Analisa Torres, a district judge at the United States District Court for the Southern District of New York.
The court’s decision was a mixed bag, granting and denying summary judgment motions from both the SEC and Ripple. The SEC’s motion for summary judgment concerning the Institutional Sales was granted but denied for other matters. Conversely, Ripple’s motion for summary judgment regarding the Programmatic Sales, the Other Distributions, and the sales made by Larsen and Garlinghouse was granted but denied concerning the Institutional Sales. The SEC’s motion for summary judgment on the aiding and abetting claim against Larsen and Garlinghouse was also denied.
A key takeaway from the ruling was the judge’s statement that XRP, as a digital token, does not in and of itself embody the Howey requirements of an investment contract, suggesting that the court does not view XRP as a security.
Congressman Lynch’s Assessment of SEC’s Approach to Crypto Regulation
At a U.S. House Committee on Financial Services hearing on 18 July 2023, U.S. Representative Stephen F. Lynch (MA-08) addressed the claim that the SEC has been exercising regulation by enforcement. He pointed to the SEC’s success in 130.5 out of 131 cases (counting the Ripple case as a half victory) as an indication that the SEC is not merely regulating by enforcement but is applying existing laws.
“I want to address the claim that the SEC has been exercising regulation by enforcement as if there are no guidelines out there that these crypto firms would be bound by. Mr. Gensler at the SEC has brought 131 cases. One hundred thirty-one cases, and he’s won 130 and a half if you count the Ripple case last week. So … the SEC is regulating by the application of law, right?“
While the SEC did see some success on 13 July 2023, it was not a complete victory for them. The court’s decision also included significant rulings in favor of Ripple Labs.
Attorney John Deaton’s Response
The XRP community, however, has expressed dissatisfaction with Lynch’s comments.
John Deaton, a prominent American attorney closely monitoring the lawsuit, responded on 26 July 2023: