- This is a developing story. You can find our previous coverage here.
In late 2020, the SEC accused Ripple Labs Inc. of selling unregistered securities when they sold XRP tokens before the formal launch of their platform. Ripple would later sell XRP on its own. Now, it looks like Ripple’s legal team may have found an essential piece of evidence that could help tip the odds in its favor. Magistrate Judge Sarah Netburn ruled that emails from former SEC Director of the Division of Corporation Finance, Bill Hinman, will be admitted into court as evidence in this case.
What do Hinman’s emails contain?
The emails in question discuss whether or not certain digital assets are securities. In them, Hinman reportedly claims that he doesn’t believe Ethereum is a security. This update is significant to the lawsuit because the SEC alleged that Ripple token XRP is a security. If the court finds that XRP is not a security, Ripple could win the case.
Hinman’s emails could prove a conflict of interest was at the heart of the case. The emails purportedly contain evidence that Hinman sought to de-legitimize Ripple and aid Ethereum. Before working for the SEC, Hinman worked at a firm that sits on the Enterprise Ethereum Alliance.
How will this affect the case’s outcome?
Initially, the emails in question became public after non-profit Empower Oversight’s successful Freedom of Information Act Request. However, just because the emails were public didn’t mean they were relevant in court. The emails will impact proceedings now that Judge Netburn has admitted them as evidence.
The court will likely determine whether Hinman stood to gain anything from declaring Ethereum a non-security. Going after Ripple by claiming XRP should be bound to securities laws would then be seen as a conflict of interest.
Future outlook for Ripple
This latest update in the Ripple SEC lawsuit is a positive development for Ripple, as it increases the chances that they will win the case. Even if Ripple does not win the case, this event will likely positively impact the price of XRP, as it will increase confidence in the project.
Of course, XRP has been frozen in the U.S. since the lawsuit began. So there is no telling what the lawsuit’s outcome may be, but crypto enthusiasts should keep an eye on it. With crypto regulations looming, the case’s outcome will probably impact crypto for years. Current SEC Chair Gary Gensler seeks to classify (most) cryptocurrencies as securities, for example.
Final thoughts
The inclusion of Hinman’s emails is a small victory for Ripple, but the case is far from over. The SEC has alleged that Ripple violated securities laws by selling unregistered securities, and if it can prove that, Ripple could have to pay hefty fines. If the SEC prevails, it could also have ripple effects on other crypto companies. For example, Ripple said it might move its business overseas if the SEC wins the lawsuit.
So the outcome of this case could have significant implications for the crypto industry- and the United States’ role in it. The U.S. has attracted companies worldwide, thanks to business-friendly regulations. If the ruling favors the SEC, crypto companies might follow Ripple’s lead in moving abroad. While the future of crypto is still up in the air, alienating the industry could have a stark impact.
- @david-grasso contributed to this article.
