SEC Might Lose All Merits in the Ripple Lawsuit, Says Former Regulator

Attorney Joseph Hall, who previously worked at the US Securities and Exchange Commission, claimed there is a “pretty good chance” that the SEC “will lose all the merits” in the lawsuit against Ripple. The American went further, saying he does not quite understand why the watchdog decided to bring this case.

The Never-Ending Battle

The legal confrontation between the US Securities and Exchange Commission (SEC) and the blockchain company Ripple has been going on for more than a year. It all started in December 2020, when the financial regulator filed a lawsuit against the firm and two of its executives. The SEC claimed that they traded $1.3 billion in XRP tokens as securities without the proper registration of the assets.

Ever since then, the battle between the two parties has seen several twists and turns. In August 2021, Ripple defendants accused some SEC employees of having XRP holdings, while the Commission scored a point by winning access to Ripple’s missing internal Slack messages shortly after.

The regulator claimed that those contain “discussions about Ripple’s desire to create speculative trading in XRP.” Prior to that, the blockchain firm refused to hand over a substantial part of the communications citing a processing error as a reason.

According to attorney Joseph Hall, though, Ripple seems to have the upper hand in the legal war. It’s worth noting that earlier in his career, he spent two years at the Commission serving as Managing Executive for Policy under Chairman William H. Donaldson.

In a recent podcast with Tony Edward, Hall said he is “perplexed why the SEC decided to bring that case.” In his view, the watchdog has a “pretty good chance that they lose all the merits” in the lawsuit.

It is worth noting that the XRP community is firmly against all the accusations. Despite their vast number and their will to tilt the case in favor of Ripple, they won’t have “any sort of deciding role in what the judge determines,” Hall opined.

He also predicted that resolving the case is highly unlikely to happen before the end of 2022:

“I stand by what I said long ago. There won’t likely be serious settlement talks until the SEC must turn over the documents.”

In November last year, Brad Garlinghouse – Ripple’s CEO – claimed that the legal lawsuit was going in favor of his firm. The executive outlined that the judge leading the case has been addressing “good questions” as he “realizes this is not just about Ripple,” and the outcome of the legal battle will have a broader impact.

The SEC vs. LBRY

Earlier this month, the SEC compared its lawsuit against Ripple with the one involving the blockchain organization LBRY Inc. Last year, the regulator alleged the company was selling unregistered securities – a move that could threaten Americans’ ability to trade with popular cryptocurrencies.

LBRY’s CEO Jeremy Kauffman argued that the tokens were not securities since there was no initial coin offering (ICO):

“LBRY rejected a similar defense, at the pleadings stage, even though that case, like Ripple’s, did not involve an ICO and only contained allegations of unregistered offers and sales.”

Commenting on the matter recently was also Ripple’s top attorney Jeremy Hogan:

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.

So, how a trial level court striking a completely different affirmative defense in that case is relevant… I don’t understand. https://t.co/g9XuBWr4Ob pic.twitter.com/X0OSRecUdB

— Jeremy Hogan (@attorneyjeremy1) February 22, 2022

Contrary to LBRY’s actions, he believes that Ripple’s fair notice defense will be strong enough to overcome the SEC’s accusations.