Has the U.S. Securities and Exchange Commission gone astray in its legal crackdown on the crypto industry? After the publication of documents on the “Hinman speech”, Ripple (XRP) and Coinbase draw new courage.
The US Securities and Exchange Commission (SEC) is scaring the crypto scene these weeks, its lawsuits against leading crypto exchanges Coinbase and Binance have opened a general offensive. In this context, the SEC’s lawsuit against Ripple (XRP) is classified as a signpost, as these proceedings before a court in New York have now been ongoing for two and a half years. Never before had a company in the crypto industry been willing not to respond obediently to orders from the SEC, but to take a legal battle to the very end. And while the wait for the ruling in the SEC vs. Ripple case continues, the documents released in the lawsuit there regarding the infamous 2018 SEC “Hinman Speech” continue to be tossed back and forth.
While the court-ordered public release of the SEC’s internal communications on the “Hinman Speech,” which are juicy in their details, were not as helpful to Ripple and XRP as hoped – they could yield more in the Coinbase case. Because Coinbase’s chief legal counsel, Paul Grewal, dug up a passage and posted it on Twitter. The gist of it there is that SEC internally doubted back in 2018 whether the usual “Howey Test” was even any good for questions in cryptocurrencies. The SEC wants to force dozens of altcoins under its control and XRP is the most prominent example. To justify its jurisdiction over the crypto sector, the SEC is stiffening its case that cryptocurrencies from Cardano (ADA) to Polygon (MATIC) to Solana (SOL) should be classified as securities (“securities”). The “Howey Test” is intended to serve as the legal basis for this.
Coinbase gathers arguments for proceedings with SEC
Paul Grewal for Coinbase doubts this. In general, Coinbase is going further in its defense anyway. Why did the SEC actually allow our IPO in 2021 if they already thought at the time that many of the cryptocurrencies traded with us were illegal, asks Coinbase’s thrust. And wasn’t there a comment in the “Hinman Speech” documents that while examples like drugs or credit cards undoubtedly need regulation, they just don’t need it from the SEC? Independent lawyers like James Murphy aka MetaLawMan note that the “Hinman Speech” documents open a door for Coinbase to refer to “”fair notice,”” i.e., the SEC’s failure to give early warning of investigations. Also in Coinbase’s favor here is the fact that the crypto exchange proactively took the SEC to court back in April to seek legal clarity.
Conclusion: SEC does not expect a walk in the park in its proceedings against crypto industry
We can’t predict how the SEC’s case against XRP and Ripple will play out. But observers are already scoffing that, after all, more than 200 cryptocurrencies are traded on Coinbase and that the SEC will somehow manage to provide complete proof of classification as a security in at least one case. Those who underestimate the staying power of the authority with hundreds of lawyers may be mistaken.