{"id":12655,"date":"2023-07-16T04:03:20","date_gmt":"2023-07-16T04:03:20","guid":{"rendered":"https:\/\/cryptoheretostay.com\/?p=12655"},"modified":"2023-07-16T04:03:21","modified_gmt":"2023-07-16T04:03:21","slug":"ripple-ruling-is-likely-to-be-appealed-and-overturned-ex-sec-official-says","status":"publish","type":"post","link":"https:\/\/cryptoheretostay.com\/?p=12655","title":{"rendered":"Ripple ruling is likely to be appealed and overturned, ex-SEC official says"},"content":{"rendered":"<p> <script type=\"text\/javascript\">\r\namzn_assoc_placement = \"adunit0\";\r\namzn_assoc_tracking_id = \"totafreearti-20\";\r\namzn_assoc_ad_mode = \"search\";\r\namzn_assoc_ad_type = \"smart\";\r\namzn_assoc_marketplace = \"amazon\";\r\namzn_assoc_region = \"US\";\r\namzn_assoc_default_search_phrase = \"crypto\";\r\namzn_assoc_default_category = \"All\";\r\namzn_assoc_search_bar = \"false\";\r\namzn_assoc_title = \"\";\r\namzn_assoc_rows =\"1\";\r\n<\/script>\r\n<script src=\"\/\/z-na.amazon-adsystem.com\/widgets\/onejs?MarketPlace=US\"><\/script><br \/>\n <\/p>\n<p>The Ripple case ruling is \u201cripe for appeal\u201d and likely to be overturned, John Reed Stark, former chief of internet enforcement at the SEC, noted in a LinkedIn post on July 14.<\/p>\n<p>The court decision, which Cameron Winklevoss hailed as a watershed moment, \u201cresides on shaky ground,\u201d Stark wrote.<\/p>\n<h2>Ripple court ruling is \u2018troubling on multiple fronts\u2019<\/h2>\n<p>According to Stark, the court ruling in the Ripple case is \u201ctroubling on multiple fronts.\u201d He wrote that the ruling \u201cseems anathema to the SEC\u2019s mission\u201d of protecting investors.<\/p>\n<p>The court ruled that XRP was sold as a security to institutional investors. Therefore, the Ripple ruling grants institutional investors the protections offered by the SEC. However, since the court ruled that XRP is not a security when sold on crypto exchanges, the ruling does not protect retail investors, Stark noted.<\/p>\n<p>Therefore, the Ripple decision creates a \u201cclass of quasi-securities\u201d that \u201cdiscriminates and morphs\u201d based on how sophisticated the investors are. This discrimination is \u201ccounter-intuitive, inconsistent with SEC case law, and unprecedented in this context,\u201d Stark wrote.<\/p>\n<p>Additionally, the court decision declared that tokens sold through exchanges are not securities because exchange customers are \u201cpresumed to not know anything about the crypto-issuer,\u201d Stark wrote, adding:<\/p>\n<p>\u201cBut merely because an investor is ignorant or unwilling to do research, has never served as a viable defense to a securities violation.\u201d<\/p>\n<p>Stark further stated that the ruling is \u201cnot only patronizing but just plain insulting,\u201d because it presumes \u201cretail investors are typically stupid.\u201d<\/p>\n<p>Moreover, Stark believes that retail investors are not as ignorant as the court ruling presumes. Retail investors bought XRP because they believed XRP price will increase because of Ripple, even if they did not know they were supplying capital to the firm, he wrote.<\/p>\n<p>As per the Ripple decision, if retail investors do not know the token issuers and the issuers do not who is buying their tokens, the token is not a security, Stark wrote. However, \u201cthe issue is whether investors can expect profits from the efforts of a third party, known or unknown,\u201d he noted.<\/p>\n<p>Stark further questioned:<\/p>\n<p>\u201cHow can it be that tokens that are securities when sold to institutional investors then somehow miraculously transform and become \u201cnot securities\u201d when those institutional investors or the issuer itself, sell the tokens on Coinbase or Binance?\u201d<\/p>\n<h2>Overturn likely, Stark says<\/h2>\n<p>The Ripple court decision is a partial summary judgment from a single district court judge. According to Stark, while the ruling is \u201cimportant\u201d and \u201cworthy of study,\u201d it is \u201cnot binding precedent on other courts.\u201d<\/p>\n<p>He added that the Ripple ruling is likely to be appealed. Furthermore, \u201cgiven the unprecedented nature of the decision\u201d the court will likely certify an immediate, interlocutory appeal and the Second Circuit would likely hear the appeal, he wrote.<\/p>\n<p>\u201cThe bottom line: Stock is always stock \u2013 it can\u2019t transmogrify into \u201cnot stock.\u201d So my take is that the SEC will appeal the Ripple decision to the 2nd Circuit and the 2nd Circuit will overturn the District Court\u2019s rulings related to \u201cprogrammatic\u201d and \u201cother sales.\u201d<\/p>\n<p>It is worth noting, however, that Kayvan Sadeghi, a crypto lawyer and member of the Wall Street Blockchain Alliance, said that Stark\u2019s argument \u201cmisses, or ignores\u201d a key point.<\/p>\n<p>Sadeghi said that the court ruling does not designate XRP as a security, and therefore, XRP\u2019s designation never changes. As Coinbase\u2019s chief legal officer Paul Grewal pointed out, the ruling said, \u201cXRP, as a digital token, is not in and of itself a \u2018contract, transaction.\u201d<\/p>\n<p>Sadeghi elaborated that it is possible to structure investment contracts around any asset and include a token sale as part of an investment contract transaction. However, the token itself \u201cdoes not embody the circumstances of those transactions and does not itself ever become a security,\u201d Sadeghi wrote.<\/p>\n<p><script type=\"text\/javascript\">\r\namzn_assoc_placement = \"adunit0\";\r\namzn_assoc_tracking_id = \"totafreearti-20\";\r\namzn_assoc_ad_mode = \"search\";\r\namzn_assoc_ad_type = \"smart\";\r\namzn_assoc_marketplace = \"amazon\";\r\namzn_assoc_region = \"US\";\r\namzn_assoc_default_search_phrase = \"bitcoin\";\r\namzn_assoc_default_category = \"All\";\r\namzn_assoc_search_bar = \"false\";\r\namzn_assoc_title = \"\";\r\namzn_assoc_rows =\"1\";\r\n<\/script>\r\n<script src=\"\/\/z-na.amazon-adsystem.com\/widgets\/onejs?MarketPlace=US\"><\/script><br \/>\n<br \/><a href=\"https:\/\/cryptoslate.com\/ripple-ruling-is-likely-to-be-appealed-and-overturned-ex-sec-official-says\/\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Ripple case ruling is \u201cripe for appeal\u201d and likely to be overturned, John Reed Stark, former chief of internet enforcement at the SEC, noted in a LinkedIn post on July 14. The court decision, which Cameron Winklevoss hailed as a watershed moment, \u201cresides on shaky ground,\u201d Stark wrote. Ripple court ruling is \u2018troubling on [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":12656,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_wp_rev_ctl_limit":""},"categories":[3],"tags":[],"class_list":["post-12655","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ethereum-news"],"_links":{"self":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts\/12655","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=12655"}],"version-history":[{"count":1,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts\/12655\/revisions"}],"predecessor-version":[{"id":12657,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts\/12655\/revisions\/12657"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/media\/12656"}],"wp:attachment":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=12655"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=12655"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=12655"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}