Ripple’s Victory: Challenging the SEC’s Approach to Digital Assets

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Recent legal rulings have highlighted increasing criticism of the U.S. Securities and Exchange Commission’s (SEC) approach to cryptocurrency regulation, especially its classification of digital assets as securities. Attorney and XRP advocate Bill Morgan has pointed out these criticisms, suggesting a growing pushback against the SEC’s stance on crypto assets.

Judge Torres in SEC v Ripple told the SEC that the XRP token itself is not a security /1 pic.twitter.com/XpjbaJbdsl
— bill morgan (@Belisarius2020) August 29, 2024

XRP’s Historic Legal Victory

Morgan emphasized XRP’s significant win in the SEC v. Ripple case, where Judge Torres clearly stated that XRP is not a security. This ruling delivered a substantial blow to the SEC’s argument that XRP, merely by existing as a digital asset, should be subject to securities regulation.

Morgan also noted Judge Orrick’s criticism in the SEC v. Payward Inc. (Kraken case), where the judge remarked that “orange groves are no more securities than cryptocurrency tokens are.” This comment directly challenged the SEC’s regulatory approach. In another case, SEC v. Binance, Judge Jackson entirely dismissed the SEC’s “embodiment theory,” which argued that a crypto token is the embodiment of an investment contract, rather than something that might be involved in an investment contract under certain conditions.

Ongoing SEC Actions in the Crypto Sector

In 2023, the SEC ramped up its actions against crypto firms, issuing Wells notices, filing lawsuits, and reaching settlements. Companies affected include those involved in Ethereum and decentralized finance, such as ShapeShift, TradeStation, and Uniswap. Centralized exchanges like Coinbase, Kraken, Binance, and Robinhood have also faced legal disputes with the regulator. Earlier this month, Ripple achieved another significant victory when the court reduced the SEC’s demand by nearly 94%, ordering Ripple to pay $125 million, ending a nearly four-year legal battle.

In the most recent development, the SEC added OpenSea, a cryptocurrency marketplace, to its list of targets as part of its ongoing crackdown on the sector. OpenSea’s CEO revealed that the SEC issued a Wells notice against the company, alleging that the non-fungible tokens (NFTs) sold on its platform are securities.