Why Ripple’s drawn-out court battle with the SEC leaves a limited legacy
Partner and co-chair of Herrick's Securities Litigation and Enforcement Group, Arthur G. Jakoby, was quoted in DL News discussing how the Securities and Exchange Commission's ("SEC") stance on crypto tokens as securities remains unclear following the conclusion of the Terraform Labs and Ripple cases.
The article noted that in the Ripple case, Judge Analisa Torres stated that "while the company violated securities laws when it directly sold XRP to institutional investors, indirect sales of XRP on retail exchanges were fine."
In a different lawsuit between the SEC and Terraform Labs, Judge Jed Rakoff disagreed with Judge Torres’ distinction between institutional and retail sales. "Unfortunately, the twin decisions of Ripple and Terraform Labs using different metrics to determine what is, and what is not, a security has wrought confusion rather than clarity," Arthur explained.
The article highlighted that many of the SEC’s cases against crypto businesses will likely end up in appeals courts. This could add varying interpretations by judges of "what securities are, compounding the confusion." Ultimately, the courts aren’t a substitute for clear rules written by Congress, Arthur said.