The SEC Is Not the King

By Frank Francone. (RealClear Policy). September 28, 2023.

In late 2020, the U.S. Securities and Exchange Commission (SEC) sued Ripple Labs, Inc. (Ripple), and two of its top executives, Brad Garlinghouse and Chris Larsen, alleging that the cryptocurrency XRP which is used by the company in its financial services products is a “security” under the Securities and Exchange Act of 1934. 

Dubbed “the cryptocurrency case of the century” by Forbes, the SEC sought billions of dollars from Ripple and its founders for seven years of XRP sales without registering the token with their agency. The civil filing, based on a sweeping legal theory that a digital asset itself is a security, immediately destroyed more than $15 billion dollars in wealth of innocent holders of XRP who had acquired the token on the secondary markets.

On July 13, 2023, Judge Analisa Torres rejected the SEC’s argument that sales of XRP on exchanges is the sale of a security. Torres ruled that sales by Garlinghouse, Larsen and the hundreds of thousands of secondary market traders of XRP on crypto exchanges were blind-bid transactions, where the parties do not know each other nor the provenance of the assets being traded. Therefore, they couldn’t have been securities. 

Read the full piece by Frank Francone in RealClear Policy here: “The SEC Is Not the King”