The possibility of Ripple winning a Legal battle against the SEC over XRP could be Promising
As the date of the pre-trial hearing between Ripple and the Securities and Exchange Commission quickly approaches, the outcome is still uncertain. Moreover, many coin exchanges have eliminated or stopped trading XRP on their platforms to avoid complications with federal securities laws.
The SEC may lose the case with Ripple
In the lawsuit, the Commission accuses Ripple Labs of illegally raising more than $ 1.3 billion to place unregistered securities through XRP. Although the Securities and Exchange Commission has a high reputation in the US financial sector and is trying to regulate crypto assets as best as possible through the excessive desire of institutions to comply with their rules, Ripple still has a huge chance of winning.
XRP was previously tested as a virtual currency. First, Ripple has already been officially evaluated by the Financial Crimes Enforcement Network (FinCEN) as a virtual currency. In the official $ 700,000 monetary penalty, the crypto asset is treated as nothing more than a virtual currency.
According to FinCEN, in 2015, Ripple Labs violated the Bank Secrecy Act and Anti-Money Laundering (AML) regulations with XRP. The evaluation of the coin, conducted by financial regulators, was completed by Ripple’s agreement on further steps to ensure compliance with AML/CFT obligations, as well as by the fintech firm withdrawing $ 450,000 in forfeiture on the claim.
U.S. Attorney Melinda Haag, who is responsible for imposing the fine, said: “Ripple Labs Inc. and its subsidiary have recognized that digital currency providers have an obligation not only to refrain from illegal activities, but also to ensure that they do not profit from creating products that avoid detection by potential criminals.”
Legislative regulators have previously classified XRP as a virtual currency, rendering the Securities and Exchange Commission’s arguments regarding XRP invalid.
Another reason Ripple could win the lawsuit could be that the Commission’s chairman duties have been transferred to Gary Gensler, the former chairman of the Commodity Futures Trading Commission (CFTC). Gensler has been known to be very cryptocurrency-friendly, having previously defined Bitcoin as a “catalyst for change”, while his colleagues have been adamant about classifying cryptocurrencies as Ponzi schemes.
During a lecture at the Massachusetts Institute of Technology, Gensler said that he does view XRP as a security, but its true definition will depend on the court, not on him. However, who he interacts with during the trial is likely to affect the fate of the crypto asset, as Ripple’s legal team has a familiar face – Mary Jo White. White and Gensler previously served as chairman of the Securities and Exchange Commission under Barack Obama. At the time, Obama appointed Gensler as chairman of the CFTC. The likelihood that these two prominent financial figures have previously crossed paths is huge, since they worked under the same leadership.
While this doesn’t mean anything yet, there is a possibility that the lawsuit could be settled before it reaches court. Currently, the pre-trial period for Ripple is set for February 22.
XRP operations outside the United States
In the UK and in many Asian countries such as Japan, XRP has already been given the title of crypto asset, making its classification of securities invalid in these regions. XRP is also mostly traded outside the US, especially in Asia. There is no consensus on cryptocurrency in the United States itself.
The cherry on top of all this cake is that US regulators seem to disagree with the very definition of cryptocurrencies in general. This was previously criticized by Ripple CEO Garlinghouse, who pointed out that the Justice Department’s report on the enforcement system failed to reach a definitive conclusion about the crypt itself. In the report, eight separate regulators presented their own definition of crypto, with some classifying it as a commodity and others stating that the cryptocurrency should be listed as a security.