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As Ripple Scores Yet Another Victory in Its Case with the SEC, Is XRP Primed to Rally Soon?

Ripple’s endgame with the US Securities and Exchange Commission is in sight. It has scored yet another victory in its battle with the regulator, and with the case’s discovery period drawing to a close, a settlement could be only a few months away. And with Ripple having racked up a number of favorable decisions in the past few months, such a settlement could be very positive for Ripple, for XRP and for cryptocurrency as a whole.

Ripple seems to be winning almost every day.

The latest decision in the ongoing Ripple-SEC case saw the presiding court deny the SEC’s motion to reconsider a previous ruling, which had required the regulator to turn over internal documents related to a speech given in 2018 by its former Director of the Division of Corporation Finance, William Hinman. These documents may contain key information on just how the SEC was internally classifying or talking about XRP prior to its legal action against Ripple, and therefore they may blow the case wide open for Ripple.

And given just how so-so crypto’s year has been so far, a positive outcome for Ripple in this case may be just the thing the market needs to recover.

The SEC Was Denied a Recent Motion

Back on January 13 of this year, Judge Sarah Netburn ruled that emails and documents concerning the June 14, 2018 speech given by William Hinman are not shielded by what’s known as “deliberative process privilege.” The SEC had claimed that they were, and that therefore they shouldn’t have to share them with the court. As such, they filed a motion asking for reconsideration of the January 13 decision.

Well, this motion has been denied, although the court has agreed to clarify its earlier ruling (without changing it). As lawyer, James K. Filan posted on Twitter on April 12, this “is a very big win for Ripple.”

The reason? In the 2018 speech, Hinman famously declared that ethereum is not a security. Aside from bitcoin (which also wasn’t a security according to Hinman), ethereum is the only cryptocurrency mentioned in this speech. According to some commentators, this is a rather curious fact: the SEC had and has not “articulated no material distinction between the operation of Ether and XRP that is relevant to federal securities laws,” as former SEC commissioner Joseph Grundfest put it in a letter to the SEC a few days after the regulator first sued Ripple.

Source: Twitter

In other words, some observers — including Ripple and its own lawyers — suspect that earlier drafts of the Hinman speech may have included reference to XRP as another cryptocurrency that isn’t a security. At the very least, they hope that emails and documents related to the speech may contain discussion of how SEC officials believed XRP also wasn’t a security. This would significantly strengthen Ripple’s case, insofar as it suggested that Ripple didn’t receive fair warning from the SEC regarding the status of XRP.

One feature of the latest ruling is that it makes it less likely the SEC will try to delay things further by appealing to the Second Circuit. This is because, in denying the SEC’s motion for reconsideration, Judge Netburn didn’t summarily reject it, but rather first “analyzed the SEC’s substantive DPP argument,” as cryptocurrency lawyer John E. Deaton put it. She acknowledged the motion’s importance and rejected it based on all of its arguments, making it unnecessary and wasteful for the SEC to go to an appeals court.

This is important, since the case has now been delayed so many times it’s getting ridiculous. However, with a minimal chance of a further appeal, it now looks as though we’re at the beginning of the end.

Why Ripple Has a Strong Chance of Prevailing

This isn’t the only ‘victory’ that Ripple has celebrated in recent weeks, with decisions mostly going in its favor and increasing the chances that it will have something to celebrate soon. In fact, Ripple CEO Brad Garlinghouse even went on TV on April 14 to say that the case is going “exceedingly well,” and “much better” than he had hoped when the SEC initiated it in December 2020.

Another key victory for Ripple came on March 11, when the court denied the SEC’s motion to strike Ripple’s fair notice defense. This defense basically states that the SEC didn’t provide Ripple with sufficient notice or warning that it would or was likely to consider XRP as a security. It’s key to Ripple’s whole case, so obviously the fact that it can present this defense will improve its chances considerably.

While rulings on individual motions are too numerous to cover in this article, one other significant ruling came when, in October of last year, Judge Netburn ordered the SEC to identify where and how exactly Ripple created ‘an expectation of profit’ from its offering of XRP to buyers. This is also highly important for the case, since it will determine whether XRP passes or fails the Howey test, which evaluates whether an asset is a security based largely on whether people buy it with an expectation of profit resulting from the efforts of a third party.

The XRP and cryptocurrency community is still waiting on the SEC to provide evidence showing that Ripple created an expectation of profit. In fact, all it’s really doing right now is waiting, since the case is still effectively in its discovery period, where each side produces evidence relevant to its case. This was due to end on January 14, but then it was pushed back to February 28, and now we will likely have to wait until July 8, 2022. This is because there’s a limited additional discovery period that ends 120 days after the denial of Ripple’s motion to dismiss, which was denied on March 11.

July 8 is the very latest ending point for the discovery period, which may end sooner (assuming that neither side wants to present or request more information). Whenever it ends, a settlement may be reached soon after between the two parties, or the court may issue a summary judgment (if no settlement can be reached).

Either way, Ripple’s case has grown stronger with every passing month, as more decisions are made in its favor. This obviously doesn’t guarantee that it will secure a positive result, yet compared to how things looked when the case was first initiated and XRP was taken off US-based exchanges, the picture certainly looks more optimistic.

Assuming that Ripple does end up securing the kind of outcome it wants, there’s no doubt that XRP will rally massively as a result. It’s interesting to note that it’s one of the few major coins that didn’t reach a new all-time high in 2021, and that its current ATH — of $3.40 — was set way back in January 2018. Given that it’s now priced at around $0.736609, it has plenty of lost ground to recover.

It’s also highly likely that a Ripple victory will provide a big boost to cryptocurrency as a whole. This is because the SEC’s case created plenty of uncertainty as to the legal status of cryptocurrencies, so if Ripple wins, other organizations will feel more confident about launching their own tokens and platforms, while investors will feel more confident about investing in them. Again, there’s no guarantee of what will happen in the summer, but if the case ends well for Ripple, it will end well for everyone else invested in the cryptocurrency market.

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CryptoVantage Author Simon Chandler

About the Author

Simon Chandler

Simon Chandler is a journalist based in London. He writes about technology, markets and politics, and has bylines for Forbes, Digital Trends, CCN, Wired, TechCrunch, the Verge, the Sun, the New Internationalist, and TruthOut, among many others. His Twitter handle is @_simonchandler_

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