The recent request by the U.S. Securities and Exchange Commission (SEC) to appeal a federal judge's ruling regarding jurisdiction over sales of the cryptocurrency Ripple may have significant implications for the regulation of digital assets in the United States. This move could potentially benefit crypto skeptics in Washington who advocate for regulating digital assets under existing securities laws.
The SEC's decision to seek an interlocutory appeal comes after Judge Jed Rakoff of the Southern District of New York explicitly rejected Torres' reasoning in a separate case involving the SEC's fraud lawsuit against stablecoin issuer Terraform Labs. Rakoff's ruling was seen as a victory for the SEC and is expected to assist the agency in obtaining permission from Torres to have a panel of judges review her ruling on secondary market sales of XRP. Ari Gabinet, a former SEC lawyer and lecturer at Brown University, believes that the appeal is likely to be granted due to the conflicting opinions. He commented, "What the SEC is saying is until this question is resolved, let's not go to trial."
Given these recent developments, the crypto industry and regulators alike are closely watching how this case unfolds and how it may influence the future regulation of cryptocurrencies in the United States. It remains to be seen whether the appeal will be granted and how it will ultimately shape the regulatory landscape surrounding digital assets.
The Ripple Question and Crypto Regulation in the US
Last week, Todd Baker, a lecturer in law at Columbia and financial services consultant, emphasized the immense respect Judge Rakoff holds when it comes to complex securities matters. This is particularly important as Rakoff's support for the Securities and Exchange Commission (SEC) in the ongoing Ripple question will likely have a significant impact on lawmakers in Washington, DC. These lawmakers are already hesitant to back a House-led Republican effort that aims to pass a new crypto market structure bill. The bill proposes making the Commodity Futures Trading Commission the primary regulator for crypto, at the expense of the SEC.
Despite the ongoing debate, powerful Democrats in Congress continue to exhibit staunch opposition towards cryptocurrencies. Representative Maxine Waters of California, who serves as the ranking Democrat on the House Financial Services Committee, expressed her view at a recent hearing. She emphasized the notion that inventing new regulatory structures should not be necessary simply because crypto companies fail to abide by existing rules and regulations.
Although the Republicans' market structure bill managed to pass the financial services panel despite Waters' objections, Senator Sherrod Brown of Ohio, another prominent Democratic skeptic of cryptocurrencies, has shown no indication that he would consider taking up the legislation if it were to pass in the House.
The decision to grant an appeal regarding the Ripple question may take several months, and even longer for the appellate court to reach a conclusion, as stated by Gabinet. This extended processes could potentially extend well into the next summer, coinciding with an election season that typically prompts a slowdown in controversial lawmaking.