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Ripple Lawsuit: A Big Win

Artwork by Milad Fakurian


The latest court order in the SEC vs. Ripple case may be the beginning of a big win for Ripple Labs, Brad Garlinghouse, and Chris Larsen. The question at the heart of this court case is whether or not Ripple, Garlinghouse, and Larsen, conducted an unregistered securities sale when XRP launched, however, the documents that the most recent court order is making the SEC produce may include written evidence of the SEC stating that XRP is not a security.

XRP court case: the most recent court order

On April 11th, U.S. Magistrate Judge Sarah Netburn denied the SEC’s motion that requested the Judge reconsider her previous ruling (that the SEC had to produce documents (68 emails and drafts) related to the former SEC director of corporate finance William Hinman’s speech where he said that ETH, BTC, and a few other digital assets, were not securities).

The reason the judge denied the SEC’s motion was because the language they used in their motion was inconsistent with previous arguments that the SEC made to the court. In their original argument, the SEC argued that Hinman’s speech was his personal opinion, but once the judge ordered the SEC to produce documents related to the speech, the SEC pivoted and filed a motion arguing that they can not produce these documents because Hinman’s speech and the documents related to it played a significant role in the SEC’s business operations and is therefore protected by the deliberative process privilege (DPP), the common-law principle that the internal processes of the executive branch of a government are immune from normal disclosure or discovery in civil litigations, Freedom of Information Act requests, etc.

However, Judge Netburn disagreed and ultimately denied the motion, stating that

“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.”

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

Why would the SEC want these documents protected by the DPP?

The SEC may have been looking to have Hinman’s speech protected by the DPP because it might contain an analysis or language that says XRP is not a security, similar to the analysis and language it used when it determined that BTC and ETH were not securities.

The SEC most likely realized this and how damaging it was to the arguments it is making against Ripple, so they filed a motion requesting that Hinman’s speech and the documents related to it be taken out of the pool of information and evidence that the court could use to come to a verdict.

XRP court case: what’s next?

The SEC may try to file an additional appeal; according to Jeremy Hogan, a lawyer who has closely been covering the SEC vs. Ripple court case, if the SEC files an additional appeal, it’s because the clarification the judge granted them does not protect their argument against XRP–this would be a positive sign that works in Ripple’s favor because it may indicate that the documents contain language that states that XRP is not a security, which is why the SEC is doing all that they can do nullify the emails and drafts related to the Hinman speech.

However, if the SEC does not appeal the order, then there is a strong possibility that the clarification does protect their case and argument against Ripple and that the information they will be able to redact will lower the probability of Hinman’s speech being harmful to their argument that XRP is a security.

Now, the SEC has 14 days to file an objection to the order, afterward Ripple will have 14 days to respond to that objection. That being said, look out for an appeal from the SEC on April 26th.