XRP lawyer Bill Morgan explains why a Ripple vs. SEC settlement is “currently impossible.”
In the ongoing legal battle between the U.S. Securities and Exchange Commission (SEC) and Ripple Labs, prominent I expressed my concerns about Platform X.
Morgan’s Assessment
Bill Morgan’s analysis centers on Kraken, citing Ripple’s case and specifically citing Judge Torres’ decision on programmatic selling of XRP. Morgan believes Kraken’s strategic use of these findings “demonstrates why the SEC is so strongly motivated to appeal Judge Torres’ decision.”
Much to the dismay of the XRP community, this makes a settlement in the SEC v. Ripple case “seems impossible at this time.”
Morgan highlights potential obstacles to the commission’s ability to agree to a settlement because of Kraken’s broad claims that call into question the SEC’s ability to demonstrate a reasonable expectation of benefits. If Judge Torres’ summary judgment decision is upheld on unsuccessful appeal, it could represent a significant obstacle to the SEC’s ability to achieve a settlement in the broader Ripple case.
Now let’s analyze Kraken’s defense strategy.
Kraken’s legal defense strategy includes challenging the SEC’s classification of certain tokens, such as ALGO, ADA, and MATIC, as securities. Kraken’s main argument is that the SEC has failed to establish clear and distinct guidelines regarding the direct relationship between issuers of these tokens (which the SEC deems ‘crypto-asset securities’) and Kraken’s customers.
Kraken mentions Ripple’s example: The blind bid/ask trading mechanism used by Kraken is similar to Ripple’s programmatic selling, which Judge Torres in the Ripple case found was operating beyond the scope of investment contracts.
Kraken’s legal defense further highlights the lack of any real connection between token issuers and purchasers. The exchange claims that the securities involve a specific relationship between the issuer and the purchaser, something the SEC reportedly failed to prove in the case of the tokens traded on Kraken. Again, this argument is similar to the SEC v. Ripple case, which specifically focused on profit expectations.
How might this affect the SEC’s settlement claims?
Kraken CEO Jesse Powell is concerned that the SEC is retaliating against the exchange following Kraken’s congressional testimony to a House committee advocating for a more precise legal framework for digital assets. In it, Kraken proposed limits on the SEC’s undefined jurisdiction over calling cryptocurrencies “securities.”
Powell believes the SEC’s primary intent was “simple retaliation, intimidation and harassment” against Kraken.
in short…
As the SEC v. Ripple case continues, the impact of Judge Torres’ ruling extends to the entire cryptocurrency and financial industry. Kraken strategically used ruling precedent from the Ripple case, which added complexity for the SEC to enforce the settlement action, according to Bill Morgan.