It’s been almost two weeks since a federal court ruling settled a years-long battle between Ripple Labs and the SEC over the nature of Ripple’s XRP token. Southern District of New York judge Analisa Torres ruled that the XRP token is not a security when sold to the general public, but it can be treated as a security for past XRP sales to institutional clients.
The verdict was a “win” for both the company and the crypto community alike, but Stu Alderoty, chief legal officer of Ripple Labs, hinted on TechCrunch’s Chain Reaction podcast that the search for regulatory clarity is far from over.
The SEC said after the ruling that the verdict in favor of Ripple on secondary markets sales was “wrongly decided” and the court “should not follow them.” The statement was mentioned in legal documents for a separate case against Terraform Labs, and the agency said it’s considering other available avenues for further review.
But Ripple won’t shy away from the SEC’s likely appeal, Alderoty said. “We think the judge got that right, and we think that was a faithful application of the law, and I think a court of appeals will not only affirm that but maybe even amplify that to even a greater extent.”
Alderoty said the Ripple case could provide clarity for other pending lawsuits. “I think our case and the decision rendered by our judge will provide comfort to other judges that the SEC is just misguided.” But, he said, the question that policymakers and lawyers should be asking is, “What’s the best regulatory framework that we can create that protects the integrity of the market?”
In general, the industry needs a comprehensive regulatory framework, not least because without it, the U.S. is at risk of losing innovation, he said. “Without that, I don’t think the crypto industry and the technology behind it, the brilliant entrepreneurs that are driving it, will be able to really realize the full potential of this technology in the U.S. and it’s going to continue to move offshore.”
And that might be true. An Electric Capital report from April found that the U.S.’s share of blockchain developers has fallen 2% per year in the last five years, dropping to 29% last year from 40% in 2017. Compared to other regions in the world, the drop in the U.S. is “a marginal difference,” Maria Shen, partner at Electric Capital, said at the time.
While Alderoty is Ripple’s lawyer, his advice to others is simple: Build a company in a country where there is a “clear regulatory regime.”
“Otherwise, you’re still going to face the hostility that we see about the face of the crypto industry in the U.S.,” Alderoty said. “Until we have a clear, comprehensive regulatory framework in the U.S., this is probably not the place where you want to start your business. And that’s an unfortunate statement.”
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