Here’s why XRP holders should hope for a “thin victory” for Ripple against the U.S. SEC

By Selena 03/15/23 5:50 PM

Why XRP holders should hope for a “narrow victory” for Ripple against the U.S. Securities and Exchange Commission (SEC) has been explained by J.W. Verret in an interview with John E. Deaton. The associate law professor of securities law at George Mason University and former SEC’s Investor Advisory Committee member also added that the agency is probably taken aback by the challenging situation with Ripple.

Verret expressed his opinions during a CryptoLaw live stream, during which Deaton questioned his opponent on the SEC’s decision to focus on Ripple in particular, even though it is one of the best-funded businesses in the cryptocurrency sector.

The interview was shared by XRP enthusiast @sentosumosaba, who quoted J.W. Verrett as saying, “The SEC underestimated the ‘fight’ inside of Ripple CEO Brad Garlinghouse.” CryptoLaw founder John Deaton added, resharing the post: “And they definitely underestimated the fight inside retail holders and the XRP ecosystem.”

And they definitely underestimated the fight inside retail holders and the #XRP Ecosystem. https://t.co/ySHWN3FD4o

— John E Deaton (@JohnEDeaton1) March 15, 2023

After the dust settled, according to Garlinghouse, Ripple would probably have spent $100 million on legal fees. The former SEC advisor responded that the agency underestimated the fight and probably expected a settlement. However, considering how things have gone, he said this is a far-off prediction. “I don’t think they saw that coming, and I think they probably expected a settlement. They underestimated the fight inside of Brad”, he added.

Verret predicts a strong likelihood that the losing side in SEC v. Ripple Labs Inc. will file an appeal. In that event, the case might serve as how the U.S. Court of Appeals for the Second Circuit and the U.S. Supreme Court rewrite the administrative law about cryptocurrency specifically.

But, the law expert cautions that if an appealable summary decision is given, the route from the appeals court to the Supreme Court might take four to five years. According to Verret, the only situation where Ripple succeeds and the SEC decides not to appeal is when the fintech triumphs entirely on the grounds of the “Fair Notice” defense.

“I think if it’s more of a win on a fair notice argument alone, […] that would obviously have a lot less implications for the following cases. And the SEC would be unlikely to challenge that, I think. If they lose on that, it doesn’t cause issues for them in other cases so they might just let that lie,” Verret stated and continued to explain: “But if it is a bigger win, then the SEC will quickly appeal it. So in some sense if you are an XRP holder, you almost want a very thin win – a win on fair notice alone.”

So, more than five more years of regulatory uncertainty and a persistently low token price for XRP holders could result from ongoing litigation in higher courts. Conversely, Verret is confident that Ripple and other cryptocurrency businesses will succeed on appeal and before the Supreme Court.

This is because the Supreme Court held that unambiguous congressional permission is required for federal agencies to decide on an issue of national concern. Lower appellate courts refer to this as the “Major Questions Doctrine.”

The case of West Virginia v. U.S. Environmental Protection Agency, in which the Supreme Court used the phrase for the first time in 2022, is crucial. Verret claims that the Supreme Court has utilized the notion in several decisions in the past.

In the 2000s FDA v. Brown & Williamson Tobacco Corp. and 2006’s Gonzales v. Oregon cases, the “Major Issues Doctrine” was used. He also suggested that the Howey test and the crypto business would be excellent examples of different applications.

“Eventually, the SEC’s discretion to regulate crypto may well be substantially constrained by the major questions doctrine. Until then, this hope will prove little solace to crypto entrepreneurs seeking to come into compliance and those who want to understand the rules of the road because of the lengthy process, however”, Verret concluded.