A former senior U.S. Securities and Exchange Commission (SEC) official thinks the recent ruling in the regulator’s high-profile lawsuit against Ripple is ready to be overturned on appeal.
John Reed Stark, who founded the SEC’s Office of Internet Enforcement and served as chief for 11 years, says in a new LinkedIn post that U.S. District Judge Analisa Torres’ ruling “is on shaky grounds.”
The SEC launched the lawsuit against Ripple in 2020, alleging that the San Francisco payment company had been selling XRP as an unregistered security.
Judge Torres sent shockwaves through the crypto ecosystem on Thursday when she ruled that Ripple’s automated, open-market sale of XRP — known as programmatic sales — did not constitute a security offering.
However, she sided with the SEC in the regulator’s assertion that the company’s direct sales of XRP to institutional participants did indeed represent securities offerings. The court plans to issue a separate order “in due course” setting a trial date for Ripple and the SEC.
Stark says the decision counterintuitively establishes “a class of quasi-effects” that changes designation based on the buyer’s level of sophistication.
“The bottom line: (a) stock is always stock – it can’t turn into ‘no stock’. So my view is that at some point the SEC will appeal the Ripple decision to the 2nd Circuit and the 2nd Circuit will review the District Court’s rulings regarding “programmatic” and “other sales…” destroy.
The Ripple decision means that the exact same token can sometimes be a security, but other times not a security. And the more ignorance and willful blindness on the part of retail investors, the less protection retail investors will have. And the less disclosure about the token, the less liability for the token issuer. That just can’t be right.”
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