Bitrabo Editorial
The legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC), which has been ongoing for almost two and a half years, has gained significant importance this week due to lawsuits against Coinbase and Binance US. James “MetaLawMan” Murphy, a renowned advisor to innovators in the digital assets space, explains on Twitter that the stakes have become higher for the SEC versus Ripple.
The reason is Judge Analisa Torres’ expected ruling on XRP’s secondary market transactions. If Torres rules that XRP tokens traded on secondary markets are not securities, it would undermine a lot of the SEC’s case against Coinbase and much of the Binance case. In its lawsuit against Coinbase, the SEC alleges that 13 tokens traded on Coinbase are securities, including Solana, Cardano, Polygon, and Filecoin. If these tokens are not classified as securities, the SEC has no case against Coinbase.
Is the Ripple Case Becoming the Bellwether?
Although a ruling by Judge Torres is not “binding precedent” in other cases, it would still be extremely important for the entire crypto industry, as only appellate and Supreme Court decisions are “binding” on lower courts. A defeat of the SEC against Ripple on this point could be highly significant. Judge Jennifer Rearden, who has been assigned to the Coinbase case, is brand new. As Bitrabo reported, she has been an active judge for less than a year so conversations between the two judges are very likely.
Murphy believes that Judge Rearden would follow Judge Torres’ legal reasoning when she analyzes whether the 13 tokens cited in the Coinbase complaint are securities. However, Murphy warns that this dynamic “works both ways.” If Judge Torres rules that XRP tokens traded on secondary markets are securities, the SEC will have a strong argument that Coinbase and Binance would be hard-pressed to refute.
Another caveat from Murphy concerns Coinbase’s “Staking-as-a-Service.” Rearden could argue that the staking is a securities offering, even though the secondary market transaction of the 13 tokens doesn’t in itself warrant a securities definition. “But the rest of the SEC’s case would be gutted,” Murphy says.
Additionally, XRP community attorney John E. Deaton managed to elicit from the SEC, during the LBRY vs. SEC case, that it does not consider secondary sales of the LBC token to be securities. With that in mind, the SEC has yet to prove whether its claims will withstand judicial scrutiny.
At the time of writing, XRP traded at $0.5280, facing key resistance at $0.5376 in the 1-day chart.
Featured image from CNBC, chart from TradingView.com