SEC v. Ripple lawsuit might prove XRP can’t be controlled, Grundfest interview

Rick Steves

The SEC v. Ripple case was a mistake, according to ex-SEC Joseph Grundfest, who said in an interview that “no matter how it turns out, we’re gonna be losers”. 

The former SEC Commissioner was one of the first to criticize the decision to go forward with the XRP lawsuit, having sent a letter to SEC Commissioners three days before the complaint was filed.

The case is at a key moment, with Judge Netburn about to confirm or reconsider her ruling on privileged information after a 180º turn by the SEC, which now states William Hinman’s 2018 speech was public guidance, not a personal opinion. The next ruling is seen as critical for a settlement between both parties or even “complete victory” for Ripple.

XRP lawsuit is a lose-lose situation

Joseph Grundfest spoke about the XRP lawsuit and the SEC’s decision to go through with it. A move that turned out to be quite unpopular even among SEC officials. Grundfest said he criticized the XRP lawsuit not on the grounds of impropriety but on judgment.

“It is hardly a secret I had questions about the judgment involved in bringing the lawsuit against XRP. I had questions about the timing, implications, policy. Is this a matter that is best addressed from a social perspective by bringing a lawsuit or by saying “let’s look at our regulations”?

“The issue for me is let’s get a system that works and generates compliant crypto, and this lawsuit has a high probability that no matter who wins actually gets us farther away from a good solution”, he said.

Grundfest explained the lose-lose situation: If the SEC wins, “we get a crazy regime where we’ll try to fit square pegs on round holes”; If XRP wins, “then arguably one of the very few cops we have on the beat winds up being weakened…”

“No matter how it turns out, we’re gonna be losers”, he concluded, adding that “if you really care about making the world a better place [..] does this litigation really help us achieve any of these results? Let’s put it this way, I’m not persuaded.”

How SEC v. Ripple wraps up?

The general feeling is that the end is near, in regard to the XRP lawsuit, whether by settlement or court decision. When asked about the outcome, Grundfest explained why it will be a complicated issue regardless.

“A lot of public discourse is around the question of whether XRP is a security or not, but there are other issues here that I think are intellectually even more intriguing and may even be more outcome determinative”.

There is a US supreme court opinion that says federal securities laws only apply to transactions that occur in the United States, with one rule of thumb being the transaction closing in the jurisdiction. “If you wind up transacting XRP on a foreign exchange, that’s not in the US, the SEC can’t reach it.”

The issue for the SEC will be to deal with the complexities of the XRP structure, the consensus mechanism, in which an XRP transaction can be closed outside the jurisdiction, whether partially or fully.

“What does it mean to confirm a transaction on a blockchain the way XRP is structured, which is an 80% consensus mechanism?”

The SEC will have to look at the history of the blockhain and figure out who is confirmed and if it can’t determine where this happened, how does it establish where the transaction actually closed?, Grundfest asked. “The burden of proof is on the plaintiff”.

“It may be that even if it is decided this is a security, the SEC may not be able to reach transactions unless they can prove they occurred in the US, and given the architecture of the system, they may not be able to do that”.

In case this is true, the SEC can win the battle and lose the war, he concluded.

Read this next

Retail FX

Banxso announces 8.7% interest rate on deposits in South Africa

“With Banxso, they can enjoy the benefits of both worlds – earning competitive interest and having the freedom to trade, all within the same platform.”

Industry News

FINRA to publish transaction details in U.S. Treasury securities

“Consistent with our longstanding practice, FINRA is introducing greater transparency in a calibrated and careful manner, benefiting liquidity and resilience in this critical market while also mitigating potential information leakage concerns.”

Institutional FX

OpenYield launches “cheap and easy” fixed income trading for brokers

“We’re on a mission to make bonds cheap and easy to trade, and are excited about the opportunity to build generational capital markets infrastructure.”

Digital Assets

Sumsub and Mercuryo publish a guide for VASPs: “Mastering Travel Rule Compliance”

“At Sumsub, we’ve concentrated our efforts on filling the gap in understanding the complexity of Travel Rule regulation and helping organizations find the best solution to stay safe and compliant while minimizing costs and avoiding potential risks of non-compliance. This guide we created with Mercuryo, our trusted partner, is the ultimate navigation tool all VASPs can consult.”

Digital Assets

Bitget Wallet Leads with Record Swap Volume & New Crypto Innovations

This week, Bitget Wallet achieved a milestone by surpassing Metamask with a record 388,757 Swap order transactions, securing the global lead. The significant 7-day trading volume, almost 68,000 more than its rival, underscores its liquidity and user trust. This robust activity signals Bitget Wallet’s prominent role and reliability in the dynamic crypto market.

Digital Assets

Embarking on a Digital Currency Journey

Imagine you’ve stumbled upon a treasure map, leading you to untold riches hidden in the vastness of the internet. Instead of gold coins and jewel-encrusted goblets, this treasure comes in the form of digital currencies, the modern-day loot coveted by many.

Reviews

Traders Union Experts Share The Trading Analyst Review For 2024

Navigating options trading in rapidly shifting markets poses a considerable challenge. This is where options trading alert services become invaluable. They aid traders in keeping abreast of evolving opportunities and market trends. In this assessment, Traders Union experts scrutinize The Trading Analyst alert service to ascertain its efficacy. 

Digital Assets

BlockDAG’s Presale Achieves $9.9M: Aiming For A 5000-Fold ROI As Cardano’s Price Rises And Fantom Launches Sonic

Explore Cardano’s surge, Sonic’s efficiency, and why BlockDAG’s growth makes it the top crypto choice. A deep dive into the future of blockchain investments.

Digital Assets

US, UK probe $20 billion Tether transfers tied to Russian exchange.

U.S. and UK authorities are investigating the movement of $20 billion in the USD-pegged stablecoin tether (USDT) through Moscow-based exchange Garantex.

<