Time to Settle: SEC and Ripple Labs Case – What it Means for Crypto Projects

real-world board of directors or executive compensation structure And how would you even begin to prepare financial statements for a decentralized platform like Ethereum? These are just some of the challenges that the SEC will face if they continue to pursue their war on crypto.

But the tide seems to be turning. Judge Torres’ ruling in the SEC v Ripple case has exposed the weaknesses in the SEC’s approach. By ruling that the XRP token sales were not necessarily linked to Ripple’s entrepreneurial efforts, Torres highlighted the difficulty of applying the Howey test to crypto projects. Unlike traditional equity investments, crypto tokens do not represent an ownership interest in the issuer, making it harder to establish a connection between the investment and the efforts of the project’s founders.

This ruling has significant implications for the SEC’s case against Coinbase. Coinbase wasted no time capitalizing on this victory by relisting the XRP token on its platform. This move sends a clear message to the SEC that targeting secondary markets in crypto securities will not be so easy. With Coinbase taking a stand, other platforms may also follow suit, further complicating the SEC’s enforcement efforts.

And it doesn’t end there. The SEC will also have to contend with the Supreme Court’s growing skepticism towards administrative agencies. The Court’s evolving major questions doctrine has the potential to curtail the SEC’s war on crypto. With the judiciary increasingly keen on reigning in the powers of administrative agencies, the SEC may find it difficult to push their regulatory agenda without clear authorization from Congress.

Given these challenges, it is in the SEC’s best interest to settle and make a deal with Coinbase. Coinbase has already shown its willingness to work with the SEC by filing a request for rulemaking to create an adapted listing process for crypto assets. This move was in line with the SEC’s own investor advisory committee’s findings, which concluded that current disclosure rules and registration processes are not feasible for crypto tokens.

Moreover, there is no shortage of experienced crypto lawyers who are willing to work with the SEC to develop an adaptive regulatory regime for crypto tokens. Many of these lawyers have a background in securities law and are familiar with the SEC’s regulatory framework. They can help the SEC navigate the unique challenges posed by crypto assets and create a regulatory environment that fosters innovation while protecting investors.

The SEC has adapted its rules in the past to accommodate new asset classes, such as asset-backed securities and real estate investment trusts. It is time for the SEC to do the same for crypto. By embracing a more collaborative approach and working with industry experts, the SEC can strike a balance between regulation and innovation, ensuring that crypto projects have the clarity and certainty they need to flourish.

In conclusion, Judge Torres’ ruling in the SEC v Ripple case has exposed the weaknesses in the SEC’s approach to crypto regulation. With Coinbase relisting the XRP token and the Supreme Court signaling its skepticism towards administrative agencies, the SEC’s war on crypto is facing significant hurdles. The best course of action for the SEC now is to settle and work with Coinbase to develop an adaptive regulatory regime for crypto tokens. By doing so, the SEC can foster innovation, protect investors, and ensure the future success of the crypto industry.