Two prominent lawyers in the crypto space are offering their take on the likely outcome of the U.S. Securities and Exchange Commission’s lawsuit against Ripple.
Stephen Palley, a blockchain and digital currency lawyer at Anderson Kill, and Gabriel Shapiro, a decentralized technology attorney at BSV Law, spoke about the lawsuit on the Unchained Podcast.
The SEC alleges Ripple illegally sold XRP as an unregistered security upon its launch, and maintains that the digital asset is a security to this day. The SEC also filed actions against Brad Garlinghouse, Ripple’s chief executive, and Chris Larsen, the company’s co-founder.
Palley predicts the San Francisco payment company will lose.
“This is a prediction. I guess I could be wrong, I have to hedge because I’m a lawyer. Ripple’s going to lose. Garlinghouse and Larsen are going to lose. They’ll monkey around, they’ll file motions to dismiss, they’ll be denied. They’ll probably do some discovery, maybe they take some depositions. Presumably in the enforcement action, they took depositions… and they’ll probably file cross-motions for summary judgement, and they’re going to lose.
Unless there’s a limitations argument or unless they get a sympathetic judge who reads through this and is convinced that this was not an ongoing securities offering. They lose and they probably settle.”
Shapiro largely agrees with Palley, though he’s less certain on the outcome for Garlinghouse and Larsen.
“I think Ripple will lose. I would say I’m less certain that the founders will end up having personal liability.
We’ll have to see about that. But certainly, Ripple will lose, in my mind. And I’m more just curious about what the remedy will end up being.”
According to a recent report citing sources familiar with Ripple’s strategy, the company will argue that its payment products do not depend on the digital asset, that news stories about Ripple have not impacted the price of XRP and that the cryptocurrency is fully liquid without the need for Ripple’s involvement.
A pretrial hearing on the lawsuit is set for February 22nd.