HomeNewsRipple Verdict Rattles SEC Veteran: What Lies Ahead for XRP?

Ripple Verdict Rattles SEC Veteran: What Lies Ahead for XRP?

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  • An ex-SEC official, John Reed Stark, warns of intensifying legal difficulties for Ripple Labs after a significant court verdict.
  • Ripple’s Chief Legal Officer and CTO swiftly respond to calm XRP community, stating the decision in Terraform Labs’ case has no impact on Ripple’s XRP.

The tides seem to be turning against Ripple Labs, as John Reed Stark, a former U.S. Securities and Exchange Commission (SEC) official, predicts worsening legal conditions for the firm. Stark’s ominous forecast followed a crucial court decision involving the Southern District of New York District Judge, Jed Rakoff.

Unsettling Ripple Waters?

The debate on whether Ripple’s XRP is a cryptocurrency or a security token has been reignited after Judge Jed Rakoff’s ruling. This judgement has allowed the SEC to continue its lawsuit against Terraform Labs and its founder, Do Kwon, disregarding arguments that the U.S. regulator had no jurisdiction and that Terraform’s algorithmic stablecoin TerraUSD was not an unregistered security.

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In a surprising turn, Rakoff refused to apply the reasoning from a July court decision favoring Ripple to the Terraform case. In that previous case, Judge Analisa Torres ruled that Ripple’s XRP sales to retail investors did not violate federal securities laws because these investors made purchases on secondary markets. However, Rakoff stated that this “distinction between purchasers” was not relevant under the Howey test, which determines whether crypto assets are securities.

Stark, who once chaired the SEC’s Office of Internet Enforcement, insinuated that Judge Rakoff’s ruling could signal a significant win for the SEC. More so, it may have severe implications on the ongoing Ripple case, potentially providing the SEC with the necessary precedent to appeal against the pivotal XRP ruling.

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A Ripple of Assurance from Ripple Executives

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In response to the former SEC official’s alarming comment, Ripple’s chief legal officer, Stuart Alderoty, quickly sought to reassure the XRP community. He insisted that the Terraform Labs verdict has no bearing on Ripple’s ruling, thereby, classifying XRP as a non-security. Alderoty explained that Terra’s case is still in its initial stage where everything the SEC contends is accepted as true. In contrast, Ripple’s judgment emerged from a comprehensive factual record formed over two years presented to the court.

Similarly, David Schwartz, Ripple’s chief technology officer, chimed in with his perspective. Schwartz noted that the Terraform case decision was based on the “unusual properties” of that specific situation and not reflective of how typical crypto assets operate.

Both Alderoty and Schwartz stressed that despite Judge Rakoff’s rejection of the Ripple verdict, the root of the disagreement lies in the distinct facts of each lawsuit, rather than a blanket judgment on crypto assets.

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Brian Johnson
Brian Johnson
A dedicated Bitcoin journalist passionate about uncovering the latest trends, developments, and innovations in the world of cryptocurrency, while delivering engaging and well-researched articles to inform and educate readers on the dynamic digital finance landscape.
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