Investors Await SEC v Coinbase and Ripple Court Rulings

The SEC may have asked for post-complaint documents to argue a more punitive penalty for XRP sales to sophisticated US investors and entities. In July, Judge Analisa Torres ruled Ripple breached Section 5 of the 1933 Securities Act when selling XRP to sophisticated investors and entities.

If Judge Torres orders Ripple to provide the documents, further breaches of Section 5 of the 1933 Securities Act could impact sentiment toward XRP.

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Significantly, SEC plans to appeal the Programmatic Sales of XRP ruling remains a headwind. In October, Judge Torres denied the SEC motion for interlocutory appeal, forcing the SEC to wait until the end of the SEC v Ripple case before filing an appeal.

The outcome of an appeal could impact the US crypto market. However, the ongoing SEC v Coinbase (COIN) case remained the hot topic of discussion.

SEC v Coinbase: Ripple CLO Alderoty Targets the SEC Lawyers

Crypto legal experts continued to share views about the SEC v Coinbase hearing from January 17, 2024.

Ripple Chief Legal Officer Stuart Alderoty posted more views about the hearing, saying,

“Last week (in Coinbase), the SEC told the Court that the question is “whether investors are “pooling [their] capital with the promoter’s efforts.” That’s wrong. Howey demands more than investing in efforts. You have to invest in a common enterprise. Revak (2d Cir. 1984).”

Alderoty shared the transcript from the hearing, where the SEC lawyer said,

“I just want to bring it back to Howey compels us to look at the economic reality of whether investors are giving up their capital and pooling that capital with the promotor’s efforts. That’s exactly what’s being done here.”

The purpose of the hearing was for Judge Katherine Failla to hear oral arguments on the Coinbase motion to dismiss (MTD). Coinbase filed the MTD in August, arguing the SEC lacks the statutory authority to regulate crypto exchanges.

The level of interest in the hearing highlights the significance of the SEC v Coinbase case. If Judge Failla grants the MTD, the SEC would have to step back from regulating crypto exchanges by enforcement. Significantly, a Coinbase win could affect the chances of the SEC winning an appeal against the XRP Programmatic Sales ruling.

On Friday, Bloomberg Intelligence Senior Litigation Analyst Elliot Z. Stein had this to say about the hearing,

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“I went into SEC v. Coinbase hearing thinking COIN would, on this motion, win dismissal of SEC’s primary claims (concerning trading) but maybe not staking and broker claims. I left thinking COIN would win full dismissal.”

Stein gave Coinbase a 70% chance of winning, saying the Coinbase definition of investment contract was more convincing. The litigation analyst also believed the case could reach the Supreme Court if it survives. A Supreme Court that limits the use of Howey would be a boon for the US crypto market,

However, investors must await the court ruling on the Coinbase MTD. Stein expects a ruling by the end of the second quarter but noted,

“This judge is extremely efficient so it could be much sooner than that.”

XRP Price Action