Ripple Lawsuit Update: The Latest Court Order Unveiled

On April 11th, U.S. Magistrate Judge Sarah Netburn denied the SEC’s motion that requested the Judge to reconsider her previous ruling. This ruling had mandated the SEC to produce documents, including 68 emails and drafts, pertaining to the speech made by William Hinman, the former SEC director of corporate finance. In that speech, Hinman stated that certain digital assets, such as ETH and BTC, were not securities.

The judge denied the SEC’s motion primarily because the language they used in their filing was inconsistent with their previous arguments presented in court. Initially, the SEC contended that Hinman’s speech was his personal opinion. However, after the judge ordered the SEC to produce the related documents, the SEC changed its stance and filed a motion claiming that they could not disclose these documents. Their argument was based on the assertion that Hinman’s speech and the associated documents played a significant role in the SEC’s business operations, and therefore, they were protected by the deliberative process privilege (DPP). The DPP is a common-law principle that grants immunity to the internal processes of the executive branch of a government from normal disclosure or discovery in civil litigations, Freedom of Information Act requests, etc.

However, Judge Netburn disagreed with the SEC’s arguments and ultimately denied the motion, stating, “Having insisted that it [the Hinman speech] reflected Hinman’s personal views, the SEC cannot now reject its own position. The Speech was not an agency communication, and the deliberations as to its content are not protected by the privilege.”

Despite the denial of the motion, the court order did grant the SEC a clarification, stating that if there were communications related to the Hinman Speech that played an integral role in the SEC’s business operations, those specific portions of the documents were protected by the DPP and could be redacted.

Unraveling the SEC’s Motive: Why Protect These Documents with DPP?

The SEC’s interest in having Hinman’s speech protected by the DPP stems from the possibility that it contains an analysis or language declaring XRP as non-security, akin to how the SEC determined BTC and ETH to be non-securities.

Recognizing the potential harm this could cause to their arguments against Ripple, the SEC likely became aware of this aspect. As a result, they filed a motion to exclude Hinman’s speech and the related documents from the pool of information and evidence the court could utilize in reaching a verdict.

Ripple Lawsuit: what’s next?

The SEC might attempt to file an additional appeal, as indicated by Jeremy Hogan, a lawyer closely following the Ripple lawsuit. If the SEC proceeds with this appeal, it suggests that the clarification granted by the judge does not safeguard their argument against XRP. This could be a favorable sign for Ripple because it potentially signifies that the documents contain language asserting XRP’s non-security status. That’s why the SEC is making significant efforts to invalidate the emails and drafts connected to the Hinman speech.

On the other hand, if the SEC refrains from appealing the order, there is a strong likelihood that the clarification adequately protects their case and argument against Ripple. In such a scenario, the redacted information would likely decrease the potential harm Hinman’s speech could cause to the SEC’s argument that XRP is a security.

Currently, the SEC has a 14-day window to file an objection to the order, and Ripple will then have 14 days to respond to that objection. As a result, be on the lookout for a potential appeal from the SEC on April 26th.