The court opened doors for blockchain company Ripple to examine the US Securities and Exchange Commission (SEC) documents showing their internal discussions about whether the Ripple-affiliated XRP is similar to cryptos like bitcoin (BTC) and ethereum (ETH), which are not considered to be securities.
“I’m going to grant in large part the defendants’ motion,” said US Magistrate Judge Sarah Netburn, as reported by Law360. While staff-to-staff email communications would not have to be produced, documents such as the SEC minutes and memos “expressing the agency’s interpretation or views” on crypto are likely discoverable.
Before the ruling, CEO Brad Garlinghouse’s counsel Matthew Solomon argued that, should the defendants find information suggesting the SEC thinks or thought that XRP was similar to bitcoin or ether,
“it could be “game over” for the whole case since the SEC isn’t in the business of regulating products that are not subject to the securities laws.”
On their part, the SEC counsel Dugan Bliss argued that the defendants are attempting to put the commission “on trial” and place focus on its plans, as opposed to Ripple’s allegedly unlawful conduct.
This document access is highly relevant for Ripple in this ongoing case in which the SEC argues that XRP is an unregistered security (among other claims) – as Ripple argued before that the regulator’s filing “based on an overreaching legal theory, amounts to picking virtual currency winners and losers as the SEC has exempted bitcoin and ether from similar regulation.”
Prior to the SEC’s complaint, “no securities regulator in the world has claimed that transactions in XRP must be registered as securities, and for good reason,” they said, adding that during a meeting with companies working with XRP, “even when asked, the SEC did not state that it considered XRP to be a security.”
Per a report on an earlier discovery hearing, the judge also stated that XRP has a currency value and utility – which an attorney who claims to have attended a court hearing (but is unrelated to the case), Jeremy Hogan, argued is opposite of a security.
On April 6, Hogan shared a 2016 cease-and-desist order that described the firm as a “digital currency company.”
(2/2) Apparently the SEC agreed with FinCen – at least back in 2016! The SEC must now explain to the Court how a “digital currency” transformed to a “digital security.” That explanation is part of the batch of documents the parties will be fighting over today.
PS. Happy Tuesday!
— Jeremy Hogan (@attorneyjeremy) April 6, 2021
Last week, Ripple scored a legal victory of sorts, when a judge agreed to redact the contents of an email exchange between Garlinghouse and an unnamed individual about the company’s venture capital operations, as well as two unnamed parties debating how XRP is conceived by the general public. Also, per a recent report on a discovery hearing, the SEC’s lawyer allegedly implied that exchanges wouldn’t be violating securities laws by relisting XRP.
At 8:35 UTC, XRP is up to the fourth place by market capitalization. It is almost unchanged in a day after it skyrocketed by 72% in a week, now trading at USD 0.97.