In the ongoing legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC), the potential for a settlement has been a hot topic. Pro-XRP lawyer Bill Morgan recently weighed in on the matter, underscoring the challenges Ripple may face even if a settlement is reached.
Ripple SEC Settlement: Not a “Showdown”
Bill Morgan dismissed the idea of the XRP lawsuit settlement being a "showdown." He also expressed skepticism about the likelihood of a settlement happening soon, which contradicts Ripple CEO Brad Garlinghouse’s recent statements. Morgan wrote on X, “This is unlikely to happen but if it does it is a compromise not a big win. It means both parties give up something.”
Morgan’s comments highlight the complexities and misconceptions surrounding the potential resolution of this high-profile case. The SEC’s lawsuit against Ripple, initiated in December 2020, alleged that the company raised over $1.3 billion through sales of its XRP token, which the SEC classified as an unregistered security. However, a 2024 court ruling by Judge Analisa Torres nuanced this interpretation by stating that certain “programmatic sales” of XRP did not constitute securities transactions.
Challenges Post-Settlement
A user on X challenged the idea of a settlement without significant concessions from the SEC, arguing, “I don’t see a point in Ripple settling unless the SEC forever guarantees to appeal nothing after Judge Torres’s final ruling.” Morgan clarified that settlements generally end disputes, including appeal rights in the current proceedings. However, he spotlighted another obstacle: “The more likely difficulty is other Ripple XRP sales since December 2020 and future Ripple sales of XRP.”
Former SEC lawyer Marc Fagel echoed Morgan’s skepticism, particularly about the financial demands made by the SEC. Fagel noted, “A settlement would mean neither party can appeal (which is probably why it won’t settle).” He also highlighted the unlikelihood of the SEC receiving the hefty penalty it seeks. “The SEC requested a $1B penalty (plus about $1B in disgorgement + interest). That is the only SEC position before the court. (They won’t get it; but the numbers have not changed.)”
Speculation and Complexity
Fagel dismissed speculation of a Ripple SEC settlement during the closed-door meeting on July 25. He explained, “I’ve tried to patiently explain to people what closed meetings are, how they work, and why a settlement (if it existed) likely wouldn’t even be calendared at one (as presumably the sole person here who used to attend them). Some appreciate the info; most are just into clickbait.”
Legal Nuances and Future Implications
Ripple’s Chief Legal Officer Stuart Alderoty referenced the court’s decision in the Aron Govil case, emphasizing that if a buyer suffers no financial loss, the SEC is not entitled to disgorgement from the seller. Morgan pointed out that this decision could influence the Ripple vs. SEC case: “If institutional investors suffered no pecuniary harm, the fact that the Second Circuit Court of Appeals did not reconsider Govil is a good thing for Ripple.”
In March 2024, the SEC argued that institutional investors suffered $480 million in damages due to Ripple’s alleged discrimination during XRP On-Demand Liquidity (ODL) sales. The agency contended that had Ripple registered the sales of XRP, the company would have been obligated to disclose discounts offered to favored institutional investors. Hence, in case of a settlement, the SEC could limit the future sales of XRP by leveraging this argument.
Regulatory Uncertainties and IPO Plans
Ripple is also considering an IPO in the U.S., but regulatory uncertainties have exacerbated difficulties. As the legal battle continues, the future of Ripple and its XRP token remains uncertain, with both regulatory and market challenges ahead.
This unfolding scenario underscores the intricate dynamics of cryptocurrency regulation and the significant impact it can have on the industry’s key players.
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