Most securities enforcement actions end up resolved with a settlement, but the deep resources and firm positions on each side could take this case to the 2nd U.S. Circuit Court of Appeals, or eventually the Supreme Court, and provide the industry more reliable guidance than the current mix of district court decisions, settlements and nonbinding statements from agency officials, Hinkes said.
“The 2nd Circuit is incredibly sophisticated in this area, and it will be very interesting to see how they rule on these keystone issues,” said Hinkes, who teaches part time at New York University’s law and business schools. The 2nd Circuit is based in New York.
Suit over registration
San Francisco-based Ripple was founded in 2012 and offers a real-time payment settlement network based on blockchain technology. Since its formation, the fintech has raised $1.38 billion from the sale of more than 14 billion units of its digital coin called XRP, according to court documents.
XRP is the world’s fourth-largest cryptocurrency today, with a $70 billion market value.
The SEC says XRP meets the definition of a security because it’s an investment contract, the test articulated in 1946 by the Supreme Court in a case called SEC v. Howey. “Section 5 of the Securities Act is all embracing,” the agency wrote in the complaint.