- SEC Chair, Gary Gensler hints at a potential appeal against Ripple’s recent case decision, questioning the verdict that exempts XRP token from disclosure requirements when selling directly to exchanges.
- The statements hint at significant ambiguity in the ruling to warrant an appeal, raising questions about the future regulatory environment for cryptocurrencies.
The regulatory ambiguity surrounding Ripple’s XRP cryptocurrency took a new turn as SEC Chair Gary Gensler hinted at an impending appeal against the recent ruling in the case. Speaking at the Press Club DC luncheon, Gensler’s comments incited conjectures about the SEC seeking an interlocutory appeal – a rare, expedited appeal process.
SEC’s Perspective on the Ripple Verdict
Gensler’s dissatisfaction with the Ripple case ruling was clear, especially the part regarding retail investors. The verdict suggested that Ripple’s XRP token did not necessitate disclosures during direct sales to exchanges, an aspect that the SEC is “still looking at and assessing,” according to Gensler.
This situation was intensified by Ripple’s XRP experiencing a price decrease following an ephemeral 80% rally post the mixed verdict. Investors had largely interpreted the verdict as a bullish signal for the contentious token.
Former SEC official, John Reed Stark, joined Gensler’s chorus of concerns. Stark pointed out that the Ripple verdict stood on a fragile foundation and predicted a likely appeal. He took issue with the verdict’s subtle differentiation between XRP’s private sales to accredited investors and its programmatic sales to exchanges. He suggested this distinction could give rise to a new category of “quasi-securities” – securities whose status varies based on the investor’s sophistication level. This, he argued, was unprecedented, counterintuitive, and inconsistent with SEC case law.
Yet, the prospect of an appeal renders the final outcome of the case uncertain, leaving a significant cloud over the future regulatory landscape for cryptocurrencies.
Ripple’s Partial Triumph and Future Implications
Ripple did score a partial victory in its battle with the SEC. The court ruled that while the institutional sales of the tokens breached federal securities laws, sales on exchanges and programmatic sales didn’t. This was because the SEC couldn’t definitively affirm that speculative investors expected profits derived from others’ entrepreneurial or managerial efforts.
The Chairman declined to comment on the SEC’s view of spot-bitcoin ETFs, citing ongoing litigation and his need to avoid prejudging applications before the regulatory body.
Gensler underlined the SEC’s mission to protect investors and promote capital formation. However, his disappointment that XRP’s exchange sales weren’t classified as a security was unmistakable. This latest hint by the SEC Chair injects further uncertainty into the case, raising questions about the regulatory classification of XRP and leaving the cryptocurrency market on tenterhooks.