The SEC, according to Joseph Hall, is not currently qualified to handle litigation involving cryptocurrencies as securities, making it difficult to win the case against Ripple.
The Securities and Exchange Commission, according to a former official, stands a decent chance of losing its $1.3 billion lawsuit against Ripple “on the merits.”
Attorney Joseph Hall also expressed concerns about the SEC’s objective in the high-stakes case against Ripple (XRP), which will have far-reaching consequences for the whole industry.
The lawsuit claims that the business and its co-founders, Brad Garlinghouse and Christian Larsen, failed to inform the Securities and Exchange Commission (SEC) about the sale of XRP tokens beginning in 2013, and that the tokens are unregistered securities. The SEC is attempting to establish that securities fraud occurred as a result.
On Feb. 22, Hall, a former Managing Executive for Policy at the Securities and Exchange Commission, participated on the Thinking Crypto podcast with host Tony Edward and said:
“I’m not totally sure what the SEC intends to prove in the XRP case.”
The stakes for the SEC and the crypto industry as a whole are quite high. “The SEC has a lot riding on this lawsuit,” Hall says, and “their entire regulation project may be effectively shut down if they lose on the merits.” He went on to say:
“And I continue to believe that (the SEC) has a fair chance of losing on the merits.”
Ripple, Hall believes, has a solid case based on the SEC’s failure to provide fair notice of its inquiry. Individuals and corporations must be notified that they are being investigated by the SEC.
“I get where you’re coming from. It’s a straightforward due process argument. The Ripple network had been in operation for years until a lawsuit was filed against them at the last minute.”
Jeremy Hogan, another attorney who has been watching and commenting on the Ripple issue for some time, feels that Ripple’s fair notice defence will be sufficient to keep it out of the fire. He highlighted a precedent from the SEC’s case against Library Credits (LBRY) in March, which was thrown out due to the SEC’s failure to provide fair notice.
Uhhmm… In the LBRY case, LBRY actually asserted a Fair Notice Defense and not only did it not get stricken, the SEC didn't even TRY and strike it.
— Jeremy Hogan (@attorneyjeremy1) February 22, 2022
Once a decision is reached in the Ripple case, it may set the tone for investigations and litigation in cryptocurrency issues for the foreseeable future. If the SEC prevails, it may launch a slew of fresh investigations and legal lawsuits targeting cryptocurrency projects. If Ripple prevails, the SEC may be forced to scale back its efforts to regulate the cryptocurrency business.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.