SEC vs Ripple: Why August 31 holds the key, the SEC’s ‘Queen’s Gambit’ and a damning email

SEC vs Ripple: Why August 31 holds the key, the SEC’s ‘Queen’s Gambit’ and a damning email

Ripple Labs Inc.’s legal battle with the U.S Securities and Exchange Commission (SEC) seems to evolve with every motion filed, with each faction developing a new attack or defense angle. Even as the battle seems to intensify, there are predictions that a settlement could happen in a few weeks’ time. But according to one expert, everything relies on the August 31 hearing.

For months now, Ripple and the SEC have been squaring off in regards to the SEC’s internal documents. These could prove whether the SEC considered XRP a security in its inner circle or whether it just decided to sue RIpple out of the blues.

While the judge did rule in favor of Ripple, the SEC has fought against having to surrender its documents. It cited the deliberative process privilege (DPP) which protects internal government processes from normal disclosure in civil litigations. Ripple is aware that laying its hands on these documents could make or break its case.

And now, come August 31, the court will hold a hearing on this privilege dispute in what could drag the SEC’s view on Ether to the center of the lawsuit.

In his latest video, Attorney Jeremy Hogan observed:

In other words, this upcoming hearing is very important because Ripple could potentially get some documents that could really help it advance its position that ‘XRP is like Ether and in 2018 the SEC said Ether is not a security and therefore XRP is not a security.’

This will be the focus of the next two months of discovery, which is the expert discovery phase. In this phase, people who are vastly knowledgeable about securities and cryptocurrencies will give their views to the court.

The SEC’s  ‘Queen’s Gambit’ that backfired

From the very beginning, Ripple has been arguing that the SEC didn’t give it fair notice that it was violating securities laws. For some time, the SEC focused on discrediting this defense. However, at some stage, it decided to engage in a gambit – sacrifice its strong position on this defense in the hopes that it can pin down Ripple elsewhere.

Hogan states, “The SEC has deployed a Queen’s gambit in this litigation, sacrificing its position on the fair notice defense in order to solidify its central position that XRP was sold as a security.”

It all started when Ripple began attacking the SEC’s stand on Ether. The regulator tried to play this away but the judge took Ripple’s side. The SEC then claimed that Bill Hinman, its former director, was giving his own personal views when he claimed Ether wasn’t a security.

And thus the gambit was set in motion and this was it. The SEC was going to admit to some extent that there was confusion in the marketplace about digital securities in exchange for strengthening its position that XRP was a security.

The SEC was caught in a tricky situation – should it admit that Hinman’s views were its official position, it risked Ripple proving that XRP was just like Ether and thus not a security. On the other hand, should it deny Hinman’s sentiments as its official stand – which it did – it risks Ripple claiming that there was no regulatory clarity at the time.

More bizarre things from the SEC

It doesn’t end there. The SEC seemed to dig its hole deeper, at least through some of its most high-ranking officials.

One of them is Hester Peirce, one of its five commissioners. She has come to be known as the ‘Crypto Mom’ thanks to her never-fading support for the crypto community in an agency that seems to love cracking down on crypto.

Following Hinman’s 2018 speech in which he cleared Ether from being a security, Crypto Mom took to Twitter to describe it as “a positive step in the SEC’s relationship with innovation.”

And it continues, with what’s perhaps the most damning evidence yet of the confusion and lack of clarity in the market. In late 2020, an individual investor wrote to the SEC to inquire if it considered XRP a security.

In response, an SEC staffer wrote the investor stating that “…Please be advised that the SEC has not issued a determination on whether the cryptocurrency XRP is a security. Whether a cryptocurrency is a security will depend on the characteristics and use of the cryptocurrency.”

This was in October 2020, just two months before SEC chair Jay Clayton filed a securities violation lawsuit against Ripple.

Original Source

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