Former SEC official John Reed Stark suggests that the Ripple lawsuit could be next in line for dismissal.
Stark recently shed light on the SEC’s unprecedented retreat from its aggressive enforcement-driven regulation against the crypto industry. He mentioned how the previous SEC leadership introduced several enforcement actions against crypto businesses, labeling several digital assets securities.
Interestingly, as reflected in its recent decisions, the SEC has pulled back to drop some appeals and enforcement actions. For context, it dropped its lawsuit against Coinbase, froze the Binance lawsuit, and dropped its investigation into Uniswap and OpenSea.
The SEC further retreated from its enforcement stance by dropping two appeals, which revolved around whether crypto businesses should be classified as securities dealers. Several crypto associations, including the Crypto Freedom Alliance of Texas and the Blockchain Association, brought the cases.
Despite a federal court finding that the SEC’s expansion of the ‘dealer’ definition extends beyond its legal authority, the commission still appealed the ruling on January 17, a few days before Gary Gensler resigned.
However, under acting chair Mark Uyeda, the SEC recently dismissed the appeal in a one-page notice. An SEC spokesperson suggested that the commission has decided to accept the federal court decision. They added that pursuing the appeal might reduce liquidity in the Treasury market, enhancing its volatility.
SEC Files Five Crypto Litigation Pauses
Following this decision, Stark claimed that the SEC has now frozen five crypto-related enforcement actions in the past few days, setting a new record in the commission.
“Since acting SEC Chair Mark Uyeda took the SEC helm, the SEC has now filed five SEC crypto-litigation ‘Pauses,’” Stark remarked.
Furthermore, he suggested that the SEC aims to grind all crypto-related litigations until its internal crypto task force, led by Commissioner Hester Peirce, concludes its assessment. It bears mentioning that the task force is expected to provide a regulatory framework for crypto.
SEC Could Dismiss Ripple Case Soon
Following the SEC’s dismissals of crypto-related litigation, Stark suggested that the Ripple lawsuit could be the next case to be dismissed.
He explained that the SEC clarified it would not pursue any case arguing that a digital asset is a security until the crypto task force concludes its assessment.
In the meantime, the SEC has not publicly revealed whether it will drop the Ripple appeal anytime soon. However, several experts, including Attorney Jeremy Hogan and Cherry Empress, suggest that the Ripple case is complicated, given that the parties already have a court order.
For context, while the court held that Ripple’s programmatic sales and other distribution of XRP were not securities, it fined the company $125 million for violating the law through its sales to institutional clients. Judge Torres also imposed an injunction on Ripple’s future institutional sales.
Based on this ruling, Empress speculated that the parties could agree to reduce the penalty before dismissing the case.
Recall that the SEC filed its opening appeal brief in the Ripple case less than a week before Gensler’s departure. Ripple will file its response in April 2025.
