A letter penned in December 2020 by the renowned American legal scholar Joseph Grundfest has recently surfaced, offering a glimpse into the past when he advised former SEC commissioner Jay Clayton against pursuing legal action against Ripple. Grundfest's grave concern was that such a lawsuit could have far-reaching consequences, potentially harming numerous innocent XRP holders worldwide.
The letter, shared by John E. Deaton of Crypto Law US, outlines the ethical and practical concerns regarding the SEC's potential lawsuit against Ripple. Grundfest, who is a former SEC commissioner himself, warned that the mere initiation of legal proceedings would lead to a halt in transactions involving XRP, resulting in a liquidity crisis that could impact the token's price and result in significant losses for third parties unconnected to Ripple.
In addition, Grundfest emphasized the systemic significance of XRP as one of the leading cryptocurrencies in the market, with a market capitalization of approximately $23.8 billion in December 2020, making it the third-largest cryptocurrency. Therefore, the lawsuit could have wide-ranging policy implications with significant ramifications for the financial and securities markets of the United States.
Grundfest also questioned the fairness of the SEC's approach, pointing out that the agency's staff failed to demonstrate any substantial distinction between the operations of Ether (ETH) and XRP that would justify applying federal securities laws exclusively to XRP. If ETH and XRP are indeed similar, then the disparate treatment by the SEC raises concerns of fairness and discretion in the Commission's actions.
The controversy surrounding the lawsuit also led some in the crypto community to speculate about the SEC's motives. It was suggested that the lawsuit could be part of a broader strategy to favor the Ethereum network over Ripple and XRP, potentially consolidating the payment rail system as a primary instrument for cross-border transactions and liquidity sourcing for institutional use.
