According to pro-crypto lawyer John Deaton, the legal dispute between the US Securities and Exchange Commission (SEC) and blockchain firm Ripple is unlikely to be resolved through a settlement. This is due to the fact that SEC Chair Gary Gensler is not willing to admit publicly that XRP transactions, including those on the secondary market, are not securities, which is a necessary condition for settlement. Instead, Deaton suggests that Ripple will only settle with the SEC if the regulator declares XRP a non-security.
It certainly wasn’t a popular tweet to start the new year, but I think it is clear that there won’t be a settlement between the SEC and @Ripple until after the judge rules, if ever. https://t.co/dnzkgkO012— John E Deaton (@JohnEDeaton1) February 14, 2023
In December 2020, the SEC filed a lawsuit against Ripple for allegedly failing to register approximately $1.4 billion in XRP cryptocurrency as securities. If the SEC wins the case, it could have significant implications for how crypto companies operate in the US. The case highlights a critical split between the crypto industry and the SEC, with crypto companies arguing that they are creating a transparent, decentralized financial ecosystem using blockchain technology, while the SEC believes most cryptocurrencies should be regulated as securities because they are essentially investment contracts that promise a financial return to customers.
Kraken, a major US cryptocurrency exchange, settled charges brought by the SEC by agreeing to pay a $30 million fine and discontinue its staking service in February 2023. However, the SEC remains confident in its case against Ripple and has refused to consider settling with the blockchain company. The Ripple case is expected to set a benchmark for the SEC’s treatment of cryptocurrencies and digital assets, as the agency has been accused of engaging in “regulation by enforcement,” which includes threats of legal action and lawsuits. Its outcome will be closely watched by both crypto companies and regulators.
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