Partial success against SEC – and for Ethereum

In the legal dispute over the question of whether XRP is a security token, i.e. a security, Ripple could now have made a decisive breakthrough. The competent court allows a key speech by former SEC director William Hinman. It argued that ether does not fall under the Securities Act. Ripple could now benefit from this.

Breakthrough in XRP litigation?

Specifically, it is about a speech by Hinman at the Yahoo Finance All Markets Summit 2014. According to the then SEC director of the corporate finance department, “the current offers and sales of ether are not securities transactions”. Hinman cited the “decentralized structure” of the Ethereum network as a reason. The application of federal securities laws to ether transactions would have “little added value”.

The SEC had previously objected to a court order to disclose internal documents related to the speech. The court dismissed this: “The court overrules the SEC’s objections and directs the SEC to comply with the orders,” according to a September 29 document.

The approval could bring a decisive turning point in the legal dispute over XRP, which has been going on for almost two years, and with it the fundamental question of how cryptocurrencies should be regulated in the USA. Ripple also relies on the decentralized issuance of XRP tokens. If the court follows Hinman’s reasoning, the cryptocurrency would also not fall under the Securities Act.

Precedent for the crypto industry

The outcome of the precedent could also be of great importance for Ethereum. SEC Chairman Gary Gensler recently emphasized similarities between staking proceeds and dividend payments. With the transition of the Ethereum blockchain to Proof of Stake, Ether can be classified as a security, according to Gensler. If Ripple leaves the field as the winner, Gensler’s recent statements would be on shaky ground.

However, it is still unclear when a verdict will be reached. Most recently, both Ripple and the SEC have been pushing for a quick end by demanding a summary judgment. With the current approval of the documents, the deadlocked legal dispute could continue to drag on.