In a rather surprising development, the SEC issued a waiver allowing Ripple to sell securities to private investors. This directly contravenes Judge Torres’ rulings in the XRP case’s lengthy cross-appeals process.
Legal experts seemed dumbfounded by the move, but acknowledged that there isn’t a clear way to stop it. Ripple will probably have a new revenue stream, yet this could undermine the legal system altogether.
Did the SEC Fulfill Ripple’s Desires?
Over the last few months, Ripple and the SEC have been locked in the appeals process of their landmark legal battle. Although both parties dropped the case itself in March, they worked together to try to remove a restriction from the Gensler era.
This restriction forbade Ripple from selling securities to retail investors.
The effort objectively failed via the traditional route, but the Commission is trying to grant Ripple’s request anyway via a waiver, which it issued last Friday:
“In light of the facts and circumstances…the Commission has determined… that good cause exists for not denying the exemption contained therein. Accordingly, IT IS ORDERED… that a waiver from the application of the disqualification provision… is hereby granted to Ripple,” the waiver read.
What does all this mean? Essentially, the SEC’s waiver theoretically fulfills Ripple’s biggest ask from the cross-appeal. Ripple wanted its fines repaid and violations scrubbed from its legal record, which is not happening.
However, reprieve from its securities sales ban was its most important goal.
An Unprecedented Move
Marc Fagel, a former SEC official and litigator who’s closely examined the Ripple case, seemed downright gobsmacked. In a thread on X (formerly Twitter), he called the move “unprecedented and arguably dubious,” “arguably lawless,” and more.
He noted that the cross-appeal’s presiding Judge explicitly rejected Ripple’s request on a few occasions. Therefore, Fagel referred to this waiver as “a pretty blatant FU to the court.”
Nonetheless, he emphasized that there isn’t a clear path to block or repeal this waiver:
“Even if it’s illegal, who’s gonna complain? At least unless/until XRP investors lose their money and ask why the SEC didn’t stop it,” he said.
When asked about a potential lawsuit, Fagel responded:
“Who’s gonna bring the case? If Ripple starts selling XRP pursuant to the waiver, the SEC obviously isn’t going to care, and the court can’t take action on its own even if it believes the injunction is being wrongfully violated.”
In other words, this waiver represents new territory in crypto regulation. As long as the firm has this waiver, it can honestly argue that any securities sales are completely legal.
In the short run, the SEC has given Ripple a valuable new revenue stream. These securities sales could fund any number of ambitious growth plans. XRP enthusiasts have plenty to be excited about unless someone blocks the waiver somehow.
Looking forward, however, this represents an intense legal escalation. The SEC is already receiving flak for unfairly favoring the crypto industry, and now it’s going even further.
In the long run, this could undermine all the federal government’s guardrails to rein in crypto.
