Ripple vs. SEC Lawsuit Takes Unexpected Turns Before May 6

Key Points:

• The SEC may be correct about investors purchasing XRP in the hope that Ripple would win its ongoing action against the SEC.
• If the SEC’s expert opinion is correct, the company will be held liable for the price variations of Bitcoin and Ethereum that affect the value of XRP.
• The complaint emphasizes the importance of litigation in influencing the future of cryptocurrency and its investors.

While the cryptocurrency industry awaits the summary judgment in the Securities and Exchange Commission (SEC) lawsuit against blockchain startup Ripple, the case has taken a new twist that has the potential to greatly influence the ultimate conclusion.

According to Bill Morgan, an XRP lawyer, the US SEC may be correct about investors purchasing XRP in the hope that Ripple would win its ongoing action against the SEC.

The lawsuit is part of the SEC’s continuing legal fight with Ripple, which contends that XRP is an unregistered security.

Morgan, in particular, stated in a tweet on April 7 that the SEC’s expert confessed that Bitcoin (BTC) and Ethereum (ETH) prices had been responsible for up to 90% of changes in the value of XRP since mid-2018.

Morgan’s comment implies that some supporters of Ripple and XRP accept the truth of parts of the SEC’s accusations, even as they argue against the cryptocurrency’s overall legal case.

If the SEC’s expert premise is correct, he believes Ripple is indirectly allowing the value of XRP to be impacted by Bitcoin and Ethereum price movements. As a result, the SEC aims to support the allegation by giving proof that Ripple’s pricing announcements affect the value of XRP.

Significantly, Morgan’s theory is supported by the fact that Bitcoin’s value changes affect the prices of the majority of other cryptocurrencies.

Moreover, Morgan claims that Ripple’s status as a centralized corporation gives them power over the XRP pricing. This raises concerns regarding XRP’s decentralization and Ripple’s participation in its market performance. He emphasized that the assumption that the company’s substantial XRP holdings indicate centralization of the XRP Ledger and that XRP qualifies as security remains.

It’s worth mentioning that Ripple is being sued by the SEC for selling unregistered securities in the form of XRP coins. Ripple is requesting the release of Hinman speech papers in which the regulator referred to Bitcoin and Ethereum as securities as part of its defense.

According to Morgan, the regulator’s allegation concedes that investors may be betting on Ripple’s legal efforts rather than the company’s economic operations to harvest profits.

“Paradoxically, the SEC may be correct about investors relying on Ripple’s efforts but not because of Ripple’s business efforts or sales of XRP but it’s legal efforts defeating the SEC’s lawsuit should it be successful,” he said.

This shows that the result of Ripple’s legal fight with the SEC has a significant impact on the value of XRP. As so, it emphasizes the importance of litigation in influencing the future of Bitcoin and its investors.

Jeremy Hogan, another pro-XRP lawyer, projected an unexpected conclusion for the case.

Hogan predicted that if the presiding judge opted to split the baby, she might determine that XRP sales after mid-2018 were not securities since the SEC acknowledges that Ripple’s activities during that time period had no impact on the token’s value.

The SEC’s action against Ripple has caused many proponents of the XRP cryptocurrency to weigh in on the third and fourth prongs of the Howey Test. The SEC has used this legal framework to argue that XRP should be treated as unregistered securities.

The recent SEC’s increased scrutiny of crypto companies has caused mixed opinions. House Majority Whip Tom Emmer accused SEC Chairman Gary Gensler of acting in bad faith and inhibiting the growth of the cryptocurrency industry in the United States. He says that Gensler has been naively showering the crypto community with enforcement measures while disregarding the genuine people in the industry.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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Harold

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