Ex-SEC employee believes that the court will overturn the decision in the Ripple case
Date: 2023-07-17 Author: Karina Ziganova Categories: BLOCKCHAIN
The decision in the Ripple case is "ripe for appeal" and is likely to be appealed and overturned, John Reed Stark, a former employee of the US Securities and Exchange Commission, said in a post on LinkedIn on July 14.
According to the ex-official, the court's decision, which Cameron Winklevoss called a turning point for the entire crypto industry, "stands on shaky ground."
Ripple Judgment 'Raises Concerns On Several Fronts'
The court ruled that the tokens sold on crypto exchanges were not securities. However, the XRPs that Ripple sold directly to institutional investors still fall under this definition. According to Stark, this decision creates a "class of quasi-securities" that is discriminated against and changes depending on how experienced investors are.
"The court's decision stated that tokens sold through exchanges do not constitute securities, since customers do not know anything about the crypto issuer. But ignorance or unwillingness to conduct research has never served as a reliable defense against violation of securities laws," he wrote.
Stark also said that the decision looks offensive because it assumes that retail investors tend to be stupid.
"Retail investors are not as ignorant as the court believes. They bought XRP because they believed that its price would rise, even if they didn't know that they were providing capital to the company.
The former head of the SEC also wondered why tokens, which are securities, "miraculously" cease to be so when institutional investors or the issuer itself sell them on Binance or Coinbase.
Stark believes that the decision will be appealed
The verdict in the Ripple case is a partial summary judgment rendered by a single judge. According to Stark, it is important and worth studying, but it is not a binding precedent for other courts.
Stark added that Ripple's decision is likely to be appealed. Moreover, the court is likely to certify an immediate interlocutory appeal, and it will be considered by the Second Circuit, he wrote
"Bottom line: securities are always securities. Therefore, I believe that the SEC will appeal to the Second Circuit, and the Second Circuit will overturn the decisions of the district court regarding the separation of retail and institutional sales, "he said.
However, the former employee of the Commission found opponents. Kayvan Sadeghi, a crypto lawyer and member of the Wall Street Blockchain Alliance, stated that Stark's argument misses or ignores one of the key points.
According to Sadeghi, the judgment does not define XRP as a security. As Coinbase's chief legal officer, Paul Grewal, noted, it states that "XRP as a digital token is not itself a contract or transaction."
Sadeghi clarified that investment contracts can be built around any asset, but the token itself does not embody the circumstances of these transactions and never becomes a security in itself.
