Legal Briefs, Jeremy Hogan - The Finale

[HAL1000]

 

[stuffie]

Yep. In short:

 

Ripple wins: probably

SEC wins: possibly

Trial: maybe

Something else: unlikely

 

 

 

 

[Alluvial]

I've always enjoyed Jeremy's insights and great sense of humor.  One problem for us is that when this ruling comes out it hardly means the end of the litigation.  Depending on the ruling, it will almost certainly be appealed to the Second Circuit, and after that possibly to the Supreme Court where I think Ripple would have a decent chance to win.  The majority of the Supreme Court is made up of very conservative justices, and they generally limit a governmental agency's powers to those specifically prescribed by Congress.  The Supreme Court IMO will limit the SEC's powers and would also tend to limit the definition of a security, not expand it as the SEC has attempted to do here.  They would love to dig into the pre-1934 Securities Act language about the definition of a security, all of which is great for the Ripple team.

The only way that this case doesn't get appealed it seems is if the ruling gives both sides a win.  By this, I mean that the court rules that the xrp sales from defendants through a certain date such as 2018 were sales of securities, and after they were no longer securities - sort of how sales of ether according to Hinman were at one point securities transactions, but at some point they were no longer.  Ripple has sort of offered this solution to the court by showing that since around 2018 the price of xrp has been independent of anything Ripple was doing.  The court may say ask the parties to come a resolution of when that occurred.  This way the SEC wins and gets a check and a fine and can say it won.  And Ripple can say it partially won also, and then gets to go on with its business, and very importantly its subsequent sales of xrp would not require registration, and exchanges could list xrp again.  My guess is that Ripple has attempted to settle the case on these types of terms, but I get the feeling that the SEC wants all future sales to be registered, which Ripple will not agree to.

Another possibility which is good for xrp holders but not great for Ripple is that the court rules against Ripple, but makes it clear that xrp itself is not a security, and that purchases and sales of xrp outside of Ripple's sales (and directors like Garlinghouse and Larsen) - those trading in the secondary market - are not securities transactions.  I think this would result in xrp trading in the wild to not be considered securities transactions which again would allow exchanges to list xrp (we hope).  It doesn't even seem that bad for Ripple from my understanding.  Ripple would still be able to sell its xrp, but only to accredited investors, and probably at a significant discount because that investor (from what I understand) would be required to hold it for a period of time which I believe is one year before he can sell it in the secondary market.  My worry is that the court's ruling may simply be silent on this issue (status of xrp in secondary market) because legally that issue is not before the court - it is just whether the sales of xrp by defendants were securities transactions.  But we are all hoping that she adds a paragraph or sentence on this subject so xrp can be relisted and financial institutions can use ODL without fear of violating securities laws. 

From what I have read on the fair notice defense from other similar cases is that this defense, although it seems like a good argument at first look, is likely to be denied for the reasons described by the court in the LBRY decision.   

I don't practice in this area of the law - these are just my guesses after watching the case unfold and reading some of the pleadings.

  

[Julian_Williams]

18 hours ago, Alluvial said:

I've always enjoyed Jeremy's insights and great sense of humor.  One problem for us is that when this ruling comes out it hardly means the end of the litigation.  Depending on the ruling, it will almost certainly be appealed to the Second Circuit, and after that possibly to the Supreme Court where I think Ripple would have a decent chance to win.  The majority of the Supreme Court is made up of very conservative justices, and they generally limit a governmental agency's powers to those specifically prescribed by Congress.  The Supreme Court IMO will limit the SEC's powers and would also tend to limit the definition of a security, not expand it as the SEC has attempted to do here.  They would love to dig into the pre-1934 Securities Act language about the definition of a security, all of which is great for the Ripple team.

The only way that this case doesn't get appealed it seems is if the ruling gives both sides a win.  By this, I mean that the court rules that the xrp sales from defendants through a certain date such as 2018 were sales of securities, and after they were no longer securities - sort of how sales of ether according to Hinman were at one point securities transactions, but at some point they were no longer.  Ripple has sort of offered this solution to the court by showing that since around 2018 the price of xrp has been independent of anything Ripple was doing.  The court may say ask the parties to come a resolution of when that occurred.  This way the SEC wins and gets a check and a fine and can say it won.  And Ripple can say it partially won also, and then gets to go on with its business, and very importantly its subsequent sales of xrp would not require registration, and exchanges could list xrp again.  My guess is that Ripple has attempted to settle the case on these types of terms, but I get the feeling that the SEC wants all future sales to be registered, which Ripple will not agree to.

Another possibility which is good for xrp holders but not great for Ripple is that the court rules against Ripple, but makes it clear that xrp itself is not a security, and that purchases and sales of xrp outside of Ripple's sales (and directors like Garlinghouse and Larsen) - those trading in the secondary market - are not securities transactions.  I think this would result in xrp trading in the wild to not be considered securities transactions which again would allow exchanges to list xrp (we hope).  It doesn't even seem that bad for Ripple from my understanding.  Ripple would still be able to sell its xrp, but only to accredited investors, and probably at a significant discount because that investor (from what I understand) would be required to hold it for a period of time which I believe is one year before he can sell it in the secondary market.  My worry is that the court's ruling may simply be silent on this issue (status of xrp in secondary market) because legally that issue is not before the court - it is just whether the sales of xrp by defendants were securities transactions.  But we are all hoping that she adds a paragraph or sentence on this subject so xrp can be relisted and financial institutions can use ODL without fear of violating securities laws. 

From what I have read on the fair notice defense from other similar cases is that this defense, although it seems like a good argument at first look, is likely to be denied for the reasons described by the court in the LBRY decision.   

I don't practice in this area of the law - these are just my guesses after watching the case unfold and reading some of the pleadings.

  

Of course the simplest solution for all sides to have clarity is an out of court settlement; that would allow SEC to set out terms that would not be challenged in the supreme Court and allow XRP to be re-listed on exchanges.  Most important for Ripple is to get clearance for US banks to be allowed to use Ripplenet/ODL.   Most important for SEC is that they jurisdiction over ICOs and the right to determine when a token transitions from being a security into a commodity. 

[Guest]

26 minutes ago, Julian_Williams said:

 Most important for SEC is that they jurisdiction over ICOs and the right to determine when a token transitions from being a security into a commodity. 

The SEC already has jurisdiction over ICOs. It’s why they were able to win so easily. Ripple is the first case that doesn’t involve an ICO. I think the SEC may want to push the court to see what happens, even at the risk of a loss. If the court agrees with them, SEC controls all of crypto. If not, they still have the ICO precedent.

This is of course unrelated to DeFi yield products etc which are all unregistered securities per today’s laws. They always had jurisdiction there.

[VanHasen]

(unpopular opinion)

Like many i too love jeremy and his charismatic smartness. But i feel his final legal briefs was a bit of an easy way out of his overall optimism he shared the last 2 years on this case. (which arguably brought him all the fame and attention after all). 

Basically he is saying now theres a 50% chance for a positive outcome which clearly is not what his overall tone and input on this case suggested in the the past IMO. I wonder what changed. 

Honestly i'm a bit disappointed by him kind of pulling back without really explaining why - he said he found the sec's last brief to be good, but does that nullify all their messy argumentation and bad litigation tactics he was pointing at on every occasion? I dont know but i think there are many xrp holders who held through or even bought more xrp because of jeremys optimism which could eventually turn out as a big disservice in the end.

 

[HAL1000]

America is not the world and the SEC can not control the world!

Banks want to make more profit, Ripple and XRP help them do that, by cutting costs in many areas. I have no doubt, the SEC will get a phone call one day and be told to get out of the way, because no matter what, China can't be allowed to win and if the USA doesn't join in, then China and the Brics nation coalition, will win. Ripple is an American company, with a battle tested system and the rest of the world has already said OK to it, see image above.

The last domino to fall, was always going to be the USA and the last gatekeeper was always going to be the SEC. Ultimately the USA has more to lose than to win, if they chase Ripple off shore. The $ and it's dominance is the real loser, but if America loses Ripple as well, then America really doesn't have much of an economic super power future, left in it.

Nostro Vostro account's drive demand for dollars, oil drives demand for dollars, the USA currently prints dollars for free with interest! So what is really needed going forward, is a digital asset, that can be traded globally without friction and is backed by a major power, but the $, is not the asset the rest of the world wishes to carry on paying for, therefore...

A picture paints a thousand words and this train has already left the station

Edited December 11, 2022 by HAL1000

[Julian_Williams]

3 hours ago, Ripley said:

The SEC already has jurisdiction over ICOs. It’s why they were able to win so easily. Ripple is the first case that doesn’t involve an ICO. I think the SEC may want to push the court to see what happens, even at the risk of a loss. If the court agrees with them, SEC controls all of crypto. If not, they still have the ICO precedent.

This is of course unrelated to DeFi yield products etc which are all unregistered securities per today’s laws. They always had jurisdiction there.

Good points.  Where SEC are putting themselves is serious jeopardy of being boxed in is in defining clearly what a "security contract" is.  Ripple lawyers are going a great distance in showing this term has a very limited specific meaning in the legal world, and SEC whole strategy has been to expand the meaning of "security contract" beyond that originally used by the law makers.  Taking the case to the Supreme court could end up with the SEC being slapped back on their ambitions and being put in a straight jacket which would exclude a lot of crypto from being under their jurisdiction. 

[BillyOckham]

3 minutes ago, Julian_Williams said:

Where SEC are putting themselves is serious jeopardy of being boxed in is in defining clearly what a "security contract" is.

Please forgive the correction,  and I could be wrong,  but I think you must have meant “investment contract” not “security contract”.  
 

[Julian_Williams]

41 minutes ago, BillyOckham said:

Please forgive the correction,  and I could be wrong,  but I think you must have meant “investment contract” not “security contract”.  
 

yes - you are right  "investment Contract" 

[VanHasen]

4 hours ago, Julian_Williams said:

Taking the case to the Supreme court could end up with the SEC being slapped back on their ambitions and being put in a straight jacket which would exclude a lot of crypto from being under their jurisdiction. 

Taking the case to supreme court would buy them enough time to sue half of crypto out of its existence IMO