Gary Gensler’s pretty confident that in spite of all of his admittedly supererogatory efforts to bring cryptocurrencies and related innovations to heel via regulation, his Securities and Exchange Commission’s got all the authority it needs already to govern the space. To which Ripple, accused by the SEC of both being a security and then violating a whole host of laws governing securities, says: Prove it.
Ripple says its claim that the SEC has been cagey about which crypto assets it regulates supports its argument that it lacked fair notice about XRP’s status. The case, which might not go to trial until next year, has been closely watched because many crypto companies insist regulators should update regulations for digital assets, rather than use lawsuits to enforce rules written in the 1930s…. Part of Ripple’s argument relies on a senior regulator’s statement in 2018 that ether, the world’s second-most-valuable cryptocurrency, isn’t a security. Ripple argues that market participants saw William Hinman’s speech as a public notice that digital coins could avoid classification as a security.
To which the SEC says, sure:
The SEC has asked a judge to block the fair-notice defense, saying the company had warnings about XRP’s status as a security. Ripple got U.S. legal advice as early as 2012 that XRP could be deemed an investment that would require SEC oversight, according to the agency’s court complaint…. The SEC has argued in court papers that Ripple’s lobbying efforts fueled any confusion about XRP that might have existed.
Whatever happens, at least the case will settle some of the semantic debate.
“Either way, we are going to have an opinion that would be used by other players in the space to inform how they act and decisions that they make,” said Katherine Dowling, general counsel of Bitwise Asset Management, which manages several funds that hold cryptocurrencies.
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