NY Court Is About to Rule on the Future of Crypto

If this seems hyperbolic, it may not be.

In December 2020 the US Securities and Exchange Commission (SEC) charged Ripple, who provides infrastructure for cross-border payments and also its executives with conducting a 1.3 billion dollar unregistered security offering.

The core of this is whether their XRP cryptocurrency is a security.

Ripple has been fighting this for two years because if crypto is declared a securities offering, that would mean that they would have to disclose the risks in buying it and the risks the company itself represents. That probably would not attract a lot of buyers.

Kind of like “Hey, Joe, you can buy this stuff from us but tomorrow it might be worth zero and if that happens, we won’t even be around any more. Want to buy some?”. Not the greatest marketing campaign.

Right now both sides are waiting for the judge in the case to rule. The case was heard in the Southern District of New York, the famous SDNY, where a lot of very high stakes cases have been heard. The prosecutors are top notch and the judges are experienced.

Assuming they win, the SEC will have planted a flag that says that regulating crypto is theirs.

If Ripple loses, then, via guilt by association, probably most crypto tokens would be classified as securities.

While that would not hurt my feelings, the industry would have to seriously change their practices. Selling tokens would likely follow similar rules to selling stocks or bonds.

Ripple is attempting to wiggle out of this using the we are just a platform” scam. Whether the courts believe this or not is unclear.

Part of this is a fight between the SEC and the CFTC over who should regulate tokens.

Crypto companies are rooting for the CFTC because they are a much more low touch regulator. Not a no-touch one, but definitely easier than the SEC, who is used to dealing with Fortune 100 companies every day.

Stay tuned while we wait for a verdict. Credit: Wired

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