Ripple CEO Brad Garlinghouse has said that he is optimistic about the company getting a ruling about its legal dispute with the Securities and Exchange Commission (SEC) soon, according to an interview with CNBC.
Speaking to CNBC’s Squawk Box Europe, Garlinghouse, a defendant in the legal drama, said his expected timeline before the resolution is reached in the first half of 2023, adding, “Judges take however long the judges will take.” The interview took place at the World Economic Forum in Davos, Switzerland. Citing a paragraph in Garlinghouse’s statement:
We’re optimistic that this will certainly be resolved in 2023, and maybe [in] the first half. So we’ll see how it plays out from here. But I feel very good about where we are relative to the law and the facts.
Ripple’s Legal Spat with the SEC
The legal spat between the U.S. SEC and Ripple started in 2020 when the regulator alleged that the crypto company and its executives had unlawfully sold XRP, a crypto developed in 2012, to investors without registering it as a security.
Nevertheless, Ripple denied the allegation saying that the XRP token should not be viewed as an investment contract and is used in the company’s business of facilitating cross-border transactions between banks and other financial entities.
Both the accuser (the SEC) and the defendant (Ripple) submitted their last series of briefs in December 2022, with both parties seeking a summary judgment of the case.
While they equally accused each other of stretching the law, the judge in charge of the case could rule in favor of either party, thereby avoiding a trial. Alternatively, the judge may resolve to present the matter to a jury for a comprehensive determination and, eventually, a decision.
According to Garlinghouse, the ruling will arrive “sometime in the coming single-digit months,” probably as early as June this year. The Ripple executive also noted that he does not expect the crypto firm to settle the case, although he maintains openness to the possibility.
“We have always said that we would love to settle, but it requires one very important thing, and that is that, on a go-forward basis, it’s clear that XRP is not a security.”
SEC’s Gensler Says Most Crypto Tokens Are Securities
Garlinghouse also highlighted that the SEC and its chair, Gary Gensler, have openly presented themselves as viewing every crypto asset to be a security, which according to him, leaves very little room in the “Venn diagram for settlement.”
It happened that during a September event hosted by the Practicing Law Institute, the SEC chair said that the “vast majority” of crypto tokens are securities. Gensler also suggested the Ether (ETH) could also pass as a security but did not refer to it by name.
According to a Bloomberg report, Gary Gensler also told reporters in September that crypto “staking” approaches where users are rewarded when they deposit their tokens to secure blockchain networks with interest-like payments qualify to be securities offerings. According to him, that is because “the investing public is anticipating profits based on the efforts of others.” Notably, Ethereum, the network that powers the second-largest crypto, transitioned to such a structure in 2022.
It is also worth noting that Bitcoin is the only cryptocurrency that the SEC does not consider security. In a statement, Gensler said that the king crypto has “no group of individuals in the middle,” which means investors are not “betting” on a third party.
Implications of the SEC Ripple Legal Spat
The XRP case has profound implications for Ripple and the wider cryptocurrency space. A ruling where XRP is pronounced as a security could impose more onerous restrictions on Ripple concerning the involved crypto asset. Among these stricter restrictions include requirements for transparency disclosures and increased investor protections similar to the ones imposed on regulated third parties.
Furthermore, it could also establish a precedent where many other crypto assets and blockchain projects are branded as securities.
Garlinghouse also underscored the importance of the judgment, saying during the Wednesday interview that “Something I’ve heard here in Davos repeatedly is how important this is not just to Ripple… but also, really, the whole crypto industry in the United States.” He went on further to say:
I keep reminding people that outside the United States, crypto is still thriving, Ripple’s still thriving, and we should make sure we’re continuing to engage non-U.S. regulators as well.
In a different heated discussion with CNBC’s Arjun Kharpal, the Ripple executive rebuked the SEC’s legal battle starkly, with a firm statement that “the conduct of the watchdog so far had been embarrassing.” According to the Ripple CEO, the U.S. is “notably absent” from the list of regulators developing crypto-friendly rules against the United Arab Emirates, Japan, Singapore, Switzerland, and the U.K. who pass as industry front-runners in as far as regulations favoring crypto are concerned.
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