Key Points:
- SEC Faces January 15 Appeal Deadline on Ripple Case: Markets brace for pivotal SEC move as the crypto giant’s future hangs in balance.
- Ripple Case Could Reshape Crypto Adoption: Programmatic sales ruling enabled XRP relisting and US expansion for Ripple.
- SEC's Crypto Conflict Inquiry Clouds Ripple Ruling: Hinman’s ties to Ethereum promotion intensify scrutiny of the SEC's bias.
SEC vs. Ripple: Appeal Countdown Begins
This week could be a crucial moment in the SEC vs. Ripple case as the SEC must file its appeal-related opening brief by Wednesday, January 15. In October 2024, the SEC filed its Notice C, challenging the Programmatic Sales of XRP ruling. In July 2023, Judge Analisa Torres ruled that programmatic sales of XRP did not satisfy the third prong of the Howey Test. This landmark decision enabled crypto exchanges to relist XRP, increasing adoption and allowing Ripple to expand its US business.
However, uncertainty looms over whether the SEC will file its opening brief. In a normal year, the SEC would continue with the appeal, meeting the January 15 deadline. However, Trump’s Presidential Election victory and an anticipated SEC overhaul have raised doubts about an appeal.
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SEC Chair Gensler will leave the agency on January 20. Markets expect Trump’s nominated SEC Chair Paul Atkins to reverse course on the agency’s crypto-enforcement efforts. This could include withdrawing the appeal against rulings in the Ripple case.
SEC Closed Meeting: Ripple Case Under Discussion?
On Friday, January 10, the SEC held a closed meeting. According to the Sunshine Act Notice, items for discussion included:
- Institution and settlement of injunction actions;
- Institution and settlement of administration proceedings;
- Resolution of litigation claims; and
- Other matters relating to examinations and enforcement proceedings.
Commissioners and Counsel to the Commissioners must attend the closed meetings. There is no information relating to talking points from the meeting. However, considering its proximity to the opening brief deadline, Commissioners may have discussed the Ripple case.
OIG Investigation into Crypto Conflicts of Interest Within the SEC
Additionally, the Commissioners could also have reviewed the findings from the Office of Inspector General’s investigation into potential crypto conflicts of interest within the SEC. SEC Chair Gensler has the findings, which are not publicly available. It is unclear whether Chair Gensler shared the OIG’s findings internally.
The investigation centered around former SEC Director of the Division of Corporation Finance William Hinman. In 2018, Hinman said that bitcoin (BTC) and ethereum (ETH) were not securities – the contentious issue with the speech related to Hinman’s connection with the legal firm Simpson Thacher. The law firm forms part of a group promoting Enterprise Ethereum. After leaving the agency, Hinman returned to Simpson Thacher.
Hinman continued to meet with his former employer while working on crypto regulations. Disclosed Ripple case documents revealed that the SEC’s Ethics Division warned Hinman against engaging with his former employer.
During the discovery phase of the Ripple case, the SEC made at least six attempts to shield Hinman’s speech-related documents under attorney-client privilege. The agency’s motions highlighted the contentious nature of this investigation. However, the court rejected the SEC’s motions.
The SEC’s case against Ripple could face intense scrutiny if the OIG investigation finds the SEC acted biasedly against Ripple. In 2018, XRP was the second-largest crypto by market cap before being flipped by ETH.
Article Source - Author Bob Mason